GBP/USD: Bulls step in and eye 38.2% Fibo

GBP/USD has been pressured in the open on Monday as the US dollar firms. It has touched a low of 1.2815 after sliding from a high of 1.2843.  The flows are moving through the euro due to the French elections, but the bulls have thrown in the towel, at least for now. 

The focus will move back to the Ukraine crisis and its economic impact on the eurozone and while GBP had made some headway vs the EUR in the very early phase of the Ukraine war, the move down to EUR/GBP 0.82 proved unsustainable.  

The markets are digesting the central banks and the recent comments from officials in the run-up to the Bank of England where tightening expectations remain steady.  ''WIRP suggests another 25 bp hike to 1.0% is fully priced in for the next meeting May 5, while swaps market is pricing in 200 bp of tightening over the next 12 months that would see the policy rate peak near 2.75%,'' analysts at Brown Brothers Harriman stated. 

'Despite BOE tightening, sterling continues to sink under the weight of softer data. Further losses are likely and a break below that low would target the September 2020 low near $1.2675.

Meanwhile, GBP/USD's parabolic move on Friday may have run out of gas and there are eyes on the 61.8% ratio for the days ahead. The following illustrates the potential for a significant correction across the daily and hourly charts. 

GBP/USD daily chart

The daily chart has left an M-formation behind which is a reversion pattern. However, considering how heavy the drop has been, the formation is overextended, therefore the 38.2% Fibonacci has a higher probability of being reached.

GBP/USD H1 chart

From an hourly perspective, the price is moving within a phase of accumulation and until the meanwhile resistance is overcome, there are still prospects of a lower low for the sessions ahead.