- GBP / USD fell near 1-month lows on Thursday amid sustained USD strength.
- The technical setup favors bearish traders and supports prospects for further weakness.
- The extremely oversold RSI on hourly charts guarantees caution for aggressive bearish traders.
The pair GBP/USD it maintained its strongly offered tone during the early American session and was last seen trading around the 1.3675-70 region, or the lowest level since July 21.
The prevailing climate of risk aversion, coupled with expectations that the Fed will begin to reduce its asset purchases later this year, pushed the US dollar to a nine-month high on Thursday. This was seen as a key factor that continued to put downward pressure on the GBP / USD pair.
From a technical perspective, sustained weakness below the 1.3725 region, which marks the 61.8% Fibonacci level of the recent 1.3572-1.3984 bullish move, was seen as a trigger for bearish traders. A subsequent drop below 1.3700 further compounded intraday selling pressure.
This is due to this week’s decisive advance at the 1.3775 confluence support and could have set the stage for an extension of the depreciation move. The mentioned region comprised the 50% Fibonacci level, 200-day SMA, and the lower end of a descending channel.
The negative outlook is reinforced by the fact that the oscillators on the daily chart remain deep in the bearish territory and are still far from being in the oversold zone. That being said, the RSI on hourly charts shows extremely overloaded conditions and warrants some caution.
However, GBP / USD still looks vulnerable to prolong the downward trajectory towards the July daily closing low support test near the 1.3625-20 region. The next relevant support is pegged near 1.3600 before multi-month lows around the 1.3570 area.
On the other hand, any significant recovery attempt now could be seen as an opportunity to initiate new bearish positions near 1.3700. This, in turn, should limit the upside for GBP / USD near 61.8% of the Fibonacci level – break from previous support near 1.3725, around the 1.3725 region.
4 hour chart
Technical levels
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