• GBP/USD faced rejection near a confluence hurdle amid a modest pickup in the USD demand.
• Rising bets for a BoE rate hike in 2021 should help limit any deeper losses for the British pound.
• The technical set-up favours bullish trades and supports prospects for further near-term gains.

The GBP/USD pair witnessed some selling on Thursday and dropped to sub-1.3800 levels during the first half of the trading action, though lacked any follow-through.

The risk-off impulse in the markets – amid fresh worries about a credit crunch in China's real estate sector – assisted the US dollar to stage a modest bounce from three-week lows. This, in turn, was seen as a key factor that exerted some downward pressure on the GBP/USD pair.

The pair, for now, seems to have snapped two days of the winning streak, though the downside is likely to remain limited. Moderation of Fed hike expectations, along with growing acceptance that the BoE will hike rates before the end of this year should act as a tailwind for the GBP/USD pair.

From a technical perspective, the recent strong move up from the vicinity of the 1.3400 mark stalled near the very important 200-day SMA. This coincides with the top boundary of a three-week-old ascending channel and a downward sloping trend-line extending from late July.

The mentioned confluence hurdle, just ahead of mid-1.3800s, should now act as a key pivotal point for short-term traders. A convincing breakthrough will set the stage for a further near-term appreciating move and allow bulls to aim back to reclaim the 1.3900 round-figure mark.

Meanwhile, bullish technical indicators on the daily chart support prospects for a further near-term appreciating move. That said, bulls might still wait for a sustained break through the mentioned confluence hurdle – just ahead of mid-1.3800s – before placing aggressive bets.

The GBP/USD pair might then accelerate the momentum and aim back to reclaim the 1.3900 mark. Some follow-through buying beyond September monthly swing highs, around the 1.3915 region, will be seen as a fresh trigger for bullish traders and push the pair towards the 1.3960-65 region.

On the flip side, any meaningful slide below the 1.3800 round figure might still be seen as a buying opportunity. This should help limit the downside near the overnight swing lows, around the 1.3735-30 area, which is followed by the 1.3700 mark, or the lower end of the ascending channel.

A convincing break below will negate the positive bias, rather shift the bias in favour of bearish traders and prompt aggressive technical selling. The subsequent downfall has the potential to drag the GBP/USD pair to intermediate support near mid-1.3600s en-route the 1.3600 mark.

GBP/USD daily chart

Technical levels to watch