• GBP/USD has been trying to stabilize around 1.3300 following Tuesday's drop.
  • The pair is likely to suffer additional losses if 1.3270 support fails.
  • The next bearish target is located 1.3200 in case safe-haven flows continue to dominate markets.

Following Monday's recovery attempt, GBP/USD has lost its traction and lost 0.7% on Tuesday before extending its decline early Wednesday. The pair has been trying to stabilize around 1.3300 but the risk-averse market environment suggests there is a small chance of a convincing recovery in the short term.

The second round of peace talks between Russia and Ukraine, which was scheduled for Wednesday, has been reportedly postponed toward the end of the week. Ukraine's Presidential Adviser said that the date of peace talks was under discussion. On top of this uncertainty, the governor of Ukraine's city of Kherson said earlier in the day that the city was completely surrounded by Russian forces.

There won't be any high-tier data releases from the UK on Wednesday and the dollar's market valuation is likely to continue to drive GBP/USD action.

Since the beginning of the war last week, the greenback has been gathering strength every time a new development caused geopolitical tensions to escalate. The US Dollar Index was last seen rising 0.3% on the day at 97.65 and it is likely to preserve its bullish momentum unless Russia's actions point to a willingness to look for a diplomatic solution.

Later in the day, FOMC Chairman Jerome Powell will testify before the US House Committee on Financial Services. Powell could voice his concerns over the economic outlook and cause the dollar to lose some interest. However, the CME Group FedWatch Tool shows that markets are pricing a less-than-5% chance of a 50 basis points rate hike in March, suggesting that the greenback's losses on dovish commentary are likely to remain limited. 

GBP/USD Technical Analysis

On the downside, near-term support seems to have formed at 1.3270. In case that level turns into resistance, GBP/USD could continue to push lower toward 1.3200 (psychological level, static level).

On the upside, initial resistance aligns at 1.3350 (static level) ahead of 1.3375 (20-period SMA on the four-hour chart) and 1.3430 (static level). 

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