- GBP/USD witnessed a turnaround from the top end of a two-week-old descending channel.
- The USD climbed to a fresh two-decade high and was seen as a key factor exerting pressure.
- A sustained break below the YTD low would set the stage for a fall towards the 1.1800 mark.
The GBP/USD pair stalled last week's bounce from the 1.1875 region, or its lowest level since March 2020 and witnessed a turnaround from a two-week-old descending trend-channel resistance. The mentioned barrier, currently around the 1.2035-1.2040 region, nears the 50-period SMA on the 4-hour chart and should act as a pivotal point for short-term traders.
Against the backdrop of expectations for a more aggressive policy tightening by the Fed, the prevalent risk-off mood lifted the safe-haven US dollar to a fresh two-decade high. On the other hand, Brexit woes and speculations that the Bank of England would adopt a gradual approach toward raising interest rates continued weighing on the British pound. This, in turn, prompted fresh selling around the GBP/USD pair on the first day of a new week.
Market participants now look forward to BoE Governor Andrew Bailey's testimony before the Treasury Select Committee, which might influence sterling and provide some impetus to the GBP/USD pair. The market focus would then shift to the UK monthly GDP print and the latest US consumer inflation figures due for release on Wednesday.
In the meantime, some follow-through selling below the 1.1900 mark, leading to a subsequent break through the YTD low, around the 1.1875 region, would be seen as a fresh trigger for bearish traders. This, in turn, would set the stage for a slide towards the 1.1800 round-figure mark, or the lower end of the aforementioned channel.
On the flip side, the 1.1940-1.1950 region now seems to act as an immediate resistance ahead of the 1.200 psychological mark. Any further move up might continue to confront stiff resistance and remain capped near the ascending trend-channel barrier, which if cleared would suggest that the GBP/USD pair has formed a near-term bottom.
Some follow-through buying beyond the 50-period SMA on the 4-hour chart should allow the GBP/USD pair to aim back to reclaim the 1.2100 round figure. The momentum could further get extended and lift spot prices towards testing the next relevant resistance near the 1.2175-1.2185 supply zone en-route the 1.2200 mark.
GBP/USD 4-hour chart
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Key levels to watch
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