The GBP/USD currency pair was under massive selling pressure on Tuesday. This decline wiped out a four-day rally that had begun a hair’s breadth below the psychologically important 1.3000 barrier. As the pair approaches the seven-month low it made last week, market participants are watching with bated breath. Second, they are very worried about the potential effects of the current trading environment on the UK’s fiscal health.
Having consistently well withstood numerous challenges during intraday trading, the GBP/USD pair showed heavy support just below the 1.3120 area of trade. Notably, this support includes the cryptocurrency’s 200-hour Simple Moving Average (SMA) and its 23.6% Fibonacci retracement of the drop it suffered since peaking on October 17. Traders tend to pay special attention to such confluence. A clear move under the 1.3120 support might spark deeper losses for the currency pair.
Technical indicators
Market analysts are already watching bearish oscillators on hourly and daily. Look at the chart. These factors point to further downside for GBP/USD. From a technical standpoint, the current indicators indicate that sellers are in control of the trend. Momentum is currently pushing prices lower.
Beyond that, the 38.2% Fibonacci retracement level is just over the 1.3200 level. This level has emerged as an important pivot point for GBP/USD. If the commodity pair breaks above this level it might be enough to spark a short-covering rally. This rush could push it to above the 1.3240 level. The 1.3240 region is the 50% retracement level and can act as a ceiling for further advances.
Should the positive trend continue, GBP/USD may strengthen even more. This would put the 61.8% Fibonacci retracement level to the test, which is located just above the psychological figure of 1.3300. Any optimism is cautious, with persistent downside risks continuing to kick in from fears over the UK’s fiscal sustainability.
Now, some analysts are pointing to new data that would suggest a softening UK jobs market. This news has added to the downward pressure on GBP/USD. As economic conditions continue to change, traders will remain on high alert. They will carefully watch for any news that could impact the currency pair’s trend.
Speculation has been flowing that the BoE could be about to make its first cuts to interest rates. That ever-increasing chicken little sentiment is driving the larger GBP/USD context. Market participants are dealing with unprecedented uncertainties at this moment. Changes in monetary policy, no matter how modest, are sure to move exchange rates dramatically.