The Relative Strength Index (RSI) indicator on the 4-hour chart remains below 50, pointing to a lack of recovery momentum.
On the downside, 1.2850 (static level) aligns as first support before 1.2800 (200-day Simple Moving Average (SMA), static level). In case GBP/USD confirms 1.2900 as support, it could extend its recovery toward 1.2930 (static level) and 1.3000 (100-day SMA).
GBP/USD declined sharply early Wednesday as the US Dollar (USD) gathered strength on developments surrounding the US presidential election. The pair managed to stage a rebound in the European morning and was last seen trading near 1.2900.
Once news outlets started calling Georgia and North Carolina for Donald Trump, two battleground states Republicans lost in the previous election, the USD gathered bullish momentum. In the early European session, Pennsylvania, another swing state that was seen as Kamala Harris' last chance to turn the election around, went to Trump, all but officially confirming his victory.
The initial reaction to the US election result triggered an upsurge in US Treasury bond yields. Although it's difficult to say how Trump policies will shape the US economic outlook, markets seem to be turning reluctant to bet on an aggressive Federal Reserve (Fed) Policy easing following this development. On Thursday, the Fed will announce monetary policy decisions.
In the meantime, US stock index futures were last seen rising between 1.8% and 2.7% on the day. A bullish opening in Wall Street, followed by a risk rally, could limit the USD's gains and help GBP/USD hold its ground.
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