GBP/USD Forecast: Additional losses likely if 1.2300 support fails

GBP/USD has been having difficulty gaining traction after closing in negative territory on Tuesday. 1.2300 aligns as key support for the pair and a four-hour close below that level could open the door for further losses.

Although the US Dollar struggled to gather strength on Tuesday, GBP/USD stayed on the back foot with the Pound Sterling losing interest following the disappointing PMI data that reminded investors of the UK's gloomy growth outlook. According to Reuters, traders are now fully pricing in a 25 basis points Bank of England rate cut in 2023.

On Wednesday, the souring market mood puts additional weight on GBP/USD. At the time of press, US stock index futures were down between 0.3% and 0.7% on a daily basis. In the absence of high-impact macroeconomic data releases, the risk perception could drive the pair's action in the second half of the day. If Wall Street's main indexes stage a deep downward correction, the US Dollar could find demand as a safe haven and force GBP/USD to stretch lower.

Meanwhile, the uncertainty surrounding the EU-UK negotiations on post-Brexit issues seems to be causing investors to refrain from betting on further Pound Sterling strength, at least for the time being.

GBP/USD Technical Analysis

GBP/USD broke below the ascending regression channel and closed the last five four-hour candles there. Additionally, the Relative Strength Index (RSI) indicator on the four-hour chart stays below 50, confirming the bearish shift in the short-term outlook.

As of writing, the pair was trading within a touching distance of 1.2330, where the 50- period Sİmple Moving Average (SMA) is located. Just below that level, 1.2300 (psychological level, Fibonacci 23.6% retracement of the latest uptrend) aligns as key support. If sellers manage to flip that level into resistance, the pair could extend its slide toward 1.2260 (January 24 low) and 1.2200 (Fibonacci 38.2% retracement, 100-period SMA).

On the upside, 1.2370 (20-period SMA, lower limit of the ascending channel) forms first resistance before 1.2400 (psychological level, mid-point of the ascending channel) and 1.2430 (static level).