- GBP/USD witnessed heavy selling for the second straight day on Tuesday.
- Sustained USD buying interest was seen as a key factor exerting pressure.
- The set-up supports prospects for a fall to the descending channel support.
The GBP/USD pair added to the overnight heavy losses and witnessed some selling for the second straight day on Tuesday. The bearish pressure remained unabated through the early European session and dragged spot prices to the 1.1800 neighbourhood, or the lowest level since March 2020.
The US dollar prolonged its recent strong bullish run and shot to a fresh two-decade high, bolstered by hawkish Fed expectations and the prevalent risk-off environment. This, in turn, was seen as a key factor that continued exerting downward pressure on the GBP/USD pair.
Given the overnight break below the previous YTD low, around the 1.1875 region, the subsequent weakness favours bearish traders. Hence, some follow-through weakness towards the 1.1800 round-figure, en-route the 1.1750 support zone, now looks like a distinct possibility.
The latter represents the lower boundary of over a two-week-old descending trend channel and should act as a strong base for the GBP/USD pair. That said, a convincing break through the said support would mark a fresh breakdown and pave the way for further losses.
On the flip side, any meaningful recovery attempted might now attract fresh sellers near the previous YTD low, around the 1.1875 region. This, in turn, should cap the GBP/USD pair around the 1.1900 round-figure mark, which is likely to act as a key pivotal point for traders.
Sustained strength beyond could lift the GBP/USD pair to the 1.1935-1.1940 intermediate resistance en-route the 1.2000 psychological mark. The latter represents a confluence hurdle comprising of 50-period SMA on the 4-hour chart and the top end of the descending channel.
GBP/USD 4-hour chart
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Key levels to watch
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