- GBP/USD witnesses strong selling for the second day in a row on Tuesday.
- Sustained buying interest around the USD is seen as a key factor putting pressure on it.
- The setup supports the prospects of a drop towards descending channel support.
The GBP/USD pair extends the previous day’s heavy losses and witnesses some selling for the second day in a row on Tuesday. Bearish pressure remains at the start of the European session and drags the pair to the 1.1800 region, at its lowest level since March 2020.
The US dollar continued its recent strong bull run and soared to a new two-decade high, bolstered by aggressive Fed expectations and prevailing risk-off sentiment. This, in turn, was seen as a key factor that continued to put downward pressure on the GBP/USD pair.
Given the previous day’s break below the yearly low around the 1.1875 area, the subsequent weakness favors the bears. Therefore, some continuation weakness towards the 1.1800 round level, on the way to the 1.1750 support zone, now looks like a distinct possibility.
The latter represents the lower bound of a more than two week downtrend channel and should act as a strong base for the GBP/USD pair. That said, a convincing break of said support would mark a further breakout and pave the way for further losses.
On the other hand, any significant recovery attempts could attract new sellers near the previous low in the 1.1875 region. This, in turn, should cap the GBP/USD around the 1.1900 level, which is likely to act as a sweet spot for traders.
If the strength holds, the GBP/USD pair could reach the intermediate resistance of 1.1935-1.1940 heading towards the psychological level of 1.2000. The latter represents a confluence hurdle comprising the 50-period SMA on the 4-hour chart and the top of the descending channel.
GBP/USD 4 hour chart
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GBP/USD key levels
Source: Fx Street
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