- GBP/USD lowers on Tuesday, paring some of overnight gains to one-month highs.
- Nervousness over Pelosi’s visit to Taiwan boosts the safe-haven dollar and exerts downward pressure.
- The formation of an ascending channel favors the prospects for some buying on dips.
The pair GBP/USD has seen some selling on Tuesday and extends the modest overnight pullback from the 1.2300 level, ie one-month highs. The pair, however, is showing some resistance below 1.2200 and has now managed to bounce a few pips off the daily low.
US dollar attracts some safe-haven flows amid rising diplomatic tensions over US House Speaker Nancy Pelosi’s visit to Taiwan, rebounding nicely from a new multi-week low . This turns out to be a key factor that put some downward pressure on the GBP/USD pair during the first half of the European session.
The flow of risk aversion, coupled with expectations that the Federal Reserve will not raise rates as aggressively as anticipated, continues to drag US Treasury yields lower. This is acting as a headwind for the dollar. Aside from this, increased bets on a 50 basis point rate hike by the Bank of England have helped limit GBP/USD’s losses.
Generally speaking, the recent recovery from the lowest level since March 2020, seen in the last two and a half weeks, has occurred along an uptrend channel. This points to a well-established short-term uptrend and supports the prospect of some buying below.
Therefore, any further decline below the daily swing low around the 1.2185 region is likely to stop near the lower end of the ascending channel. Such support is currently near the 1.2100 mark and is closely followed by the 200-period SMA on the 4-hour chart, around the 1.2080 region, which should act as a pivot point.
On the other hand, the 1.2245 zone could be a hurdle ahead of the 1.2280 supply zone. If the strength holds, the GBP/USD pair should break above the 1.2300 level and test the resistance of the ascending channel, currently around the 1.2315 area. A follow up buy would be seen as a new trigger for the bulls.
GBP/USD 4-hour chart
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Technical levels
Source: Fx Street
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