The GBP/USD pair dropped to fresh four-week lows, around mid-1.3600s heading into the North American session, albeit quickly recovered few pips thereafter. The pair was last seen trading around the 1.3675 region, still down nearly 0.50% for the day.
The US dollar remained well supported by expectations for an imminent Fed taper announcement and got an additional boost from the risk-off impulse in the markets. This, in turn, was seen as a key factor that dragged the GBP/USD pair lower for the third successive day, also marked the fourth session of a negative move in the previous five.
From a technical perspective, Friday’s sustained break and acceptance below the 200-period SMA on the 4-hour chart was seen as a key trigger for bearish traders. A subsequent fall below the 1.3730-35 horizontal support and the 1.3700 mark aggravated the selling pressure, which further contributed to the ongoing sharp downward momentum.
However, extremely oversold RSI on hourly charts helped limit any deeper losses amid absent relevant market-moving economic releases, either from the UK or the US. That said, the near-term bias remains tilted firmly in favour of bearish traders and supports prospects for an extension of the recent sharp pullback from levels beyond the 1.3900 mark.
Hence, a subsequent fall towards the 1.3620 intermediate support, en-route the 1.3600 mark, remains a distinct possibility. The latter coincides with August monthly lows, below which the GBP/USD pair is likely to extend the downward trajectory further towards challenging YTD lows, around the 1.3570 region touched on July 20.
On the flip side, any meaningful recovery attempted might now be seen as a selling opportunity near the 1.3700 round-figure mark. This, in turn, should cap the upside for the GBP/USD pair near the 1.3730-35 support breakpoint. A sustained move beyond might trigger a short-covering move and allow bulls to reclaim the 1.3800 mark.
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