- A sudden spike in USD demand triggers a profit taking around GBP / USD.
- A break below the confluent support of 1.3860-55 could pave the way for a further decline.
- Mixed technical indicators warrant some caution before opening aggressive positions.
GBP / USD has witnessed an intraday trend reversal from the 34-month highs and has fallen below the round level of 1.3900 at the start of the American session on Tuesday.
The US dollar has seen a solid rally from three-week lows amid a sharp rally in US Treasury yields This, in turn, has been seen as a key factor that has led to some take profit around GBP / USD.
Despite the intraday retracement of around 75 pips, the GBP / USD pair, so far, has managed to stay above the confluence support of 1.3860-55. The mentioned region comprises the 100 hourly SMA and an ascending trend line, extending from the monthly lows.
Meanwhile, the technical indicators on the 1 hour chart have been gaining bearish traction. However, the oscillators on the 4-hour and daily charts are still comfortably in positive territory and warrant caution for bears.
Therefore, it will be prudent to wait for a convincing break below the 1.3860-55 confluence support before confirming that the GBP / USD pair could have peaked in the near term. This, in turn, will set the stage for additional weakness.
The GBP / USD pair could become vulnerable to accelerate the corrective slide towards the 1.3800 level. Any further decline could be seen as a buying opportunity and remain limited near the 1.3760-55 support zone.
On the other hand, the 1.3950 region, close to the three-year highs set earlier this Tuesday, now turns into immediate resistance. A sustained force above this region has the potential to lift the GBP / USD pair towards the key psychological level of 1.4000.
GBP / USD 1 hour chart
GBP / USD technical levels
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