- A combination of factors triggers some selling around GBP / USD on Wednesday.
- The UK’s softer CPI figure weighs on the GBP amid a modest pickup in USD demand.
- The technical configuration supports the outlook for lower level buying.
The GBP / USD pair has fallen to fresh daily lows, around the 1.3750 region during the early part of the European session on Wednesday, and has returned a portion of the previous day’s gains to month-long highs.
A combination of factors have not helped the GBP / USD to capitalize on its modest intraday rally on Wednesday and have prompted some selling around the 1.3815 region. The British pound was hit by a softer-than-expected UK CPI figure for September. Apart from this, a good pickup in demand for the US dollar has put some downward pressure on the pair.
Looking at the technical picture, the recent strong positive move from near the 1.3400 level was halted on Tuesday near the 1.3830-35 confluence hurdle. The aforementioned region comprises the very important 200-day SMA and the upper bound of a bullish channel stretching from the end of September, which should act as a crucial point for short-term investors.
Meanwhile, the technical indicators on the daily chart have maintained their bullish bias and have also retraced from the overbought territory on the 4-hour chart. The formation of an ascending channel, together with bullish oscillators, support the prospects for the emergence of new purchases at lower levels. This, in turn, should help limit any significant corrective pullback for the GBP / USD pair.
Therefore, any subsequent decline could be seen as a buying opportunity around the horizontal support at 1.3760-50. This is followed by the weekly lows, around the 1.3710-05 region, which should act as a strong base for the GBP / USD pair. A convincing breakout further down could trigger some technical selling and expose the downtrend channel support near 1.3650.
On the other hand, the round 1.3800 level now appears to act as immediate resistance. Some continuation buying has the potential to push the GBP / USD towards the ascending channel confluence obstacle and the 200-day SMA, currently around the 1.3840-45 region. A sustained move above that region should pave the way for an extension of the recent bullish move.
The GBP / USD pair could point again to regain the 1.3900 level. Momentum could extend further beyond the intermediate resistance at 1.3960-65, en route to the next major hurdle near the key psychological level of 1.4000.
GBP / USD daily chart
GBP / USD technical levels
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