GBP/USD Forecast: Pound Sterling to extend correction once below 1.2170

GBP/USD has started to fluctuate in a narrow channel at around 1.2200 on Tuesday after having declined sharply during the American trading hours on Monday. 1.2170 aligns as key technical support in the near term and sellers could take action in case the pair breaks below that level. 

The negative shift witnessed in risk sentiment caused GBP/USD to turn south in the second half of the day on Monday. Additionally, the data from the US revealed that the ISM Services PMI improved to 56.5 in November from 54.4 in October, providing a boost to the US Dollar and further weighing on the pair.

Early Tuesday, US stock index futures are virtually unchanged on the day, pointing to a neutral market mood. Since the US economic docket will not be offering any high-impact data releases, the risk perception could influence the US Dollar's performance against its rivals. 

In case Wall Street's main indexes manage to open in positive territory and continue to push higher, GBP/USD is likely to gain traction. On the other hand, the US Dollar is likely to benefit from safe-haven flows if US stocks extend the slide following Monday's decline.

GBP/USD Technical Analysis

GBP/USD trades in the lower half of the ascending regression channel coming from November 10. The lower limit of the channel is located at 1.2170. If the pair falls below that level, sellers could show interest and additional losses toward 1.2130 (50-period Simple Moving Average (SMA)) and 1.2100 (Fibonacci 23.6% retracement of the latest downtrend, psychological level) could be witnessed.

On the upside, 1.2250 (mid-point of the regression channel, 20-period SMA) aligns as first resistance before 1.2300 (psychological level) and 1.2350 (end-point of uptrend).