Looks vulnerable near the 1.3100 level, bearish pennant breakout

• GBP/USD witnessed selling for the fourth day in a row and fell to a one-week low on Monday.
• Expectations of a hawkish Fed continued to underpin the USD and acted as a headwind for the major.
• Dovish comments from the BoE’s Bailey weighed on sterling and contributed to the ongoing slide.

The pair GBP/USD it extended last week’s retracement decline from 1.3300, or the 200 period EMA on the 4hr chart and saw some follow-through selling on Monday. This marked the fourth consecutive day of negative movement and dragged spot prices to a more than one-week low around the 1.3110 region during the mid-European session.

The US dollar continued to receive support from growing bets for a 50bp Fed rate hike move at the May meeting. In contrast, the British pound was weighed down by dovish comments from Bank of England Governor Andrew Bailey, saying we are starting to see evidence of slowing growth. This, in turn, put downward pressure on the GBP/USD pair.

Looking at the bigger picture, on Friday the pair confirmed a breakout through an uptrend channel, which constituted the formation of a bearish pennant pattern. Sustained weakness below the 1.3100 round level will further validate the bearish bias and set the stage for another short-term depreciation move for GBP/USD.

The next relevant support is set near the 1.3070 region, below which the downward path could extend further towards intermediate support at 1.3035. The GBP/USD pair could eventually pull back to challenge the key psychological level of 1.3000, or the lowest level since November 2020 reached earlier this month.

On the other hand, attempted recovery moves could now face stiff resistance near the 1.3150-1.3160 ​​region. Any subsequent upside move is more likely to attract fresh selling and remain capped near the 1.3180-1.3185 area. This is closely followed by the 1.3200 level, which if breached decisively could trigger a short-covering move around the GBP/USD pair.

4 hour chart

Technical levels to follow