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GBP/USD – Major support finally broken

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Further to go?

Cable finally broke through its summer lows on Tuesday and further losses may be on the cards.

The pair appeared to be shaping up for such a move last month after bouncing off a key fib level and breaking through the 200/233-day SMA band. But it dragged its feet a little after failing to make new lows on multiple occasions.

Still, the move finally came as the dollar soared in recent weeks on rising US yields and increased risk aversion in the markets. And now the question becomes how much further it will fall?

It’s worth remembering at this point that the Bank of England is among those looking to tighten monetary policy soon, with two rate hikes priced in next year, which may still make declines hard-fought.

From a technical perspective, 1.33-1.34 has long been an awkward level for the pair. It was a massive area of resistance between mid-2018 and late-2021.

So it will be interesting to see what kind of a test it provides from above and we may not have to wait long. The stochastic and MACD on the 4-hour chart indicate there’s plenty of momentum in the sell-off still.

The consolidation we’re currently seeing appears to be a continuation pattern and has already seen resistance around 1.35, a level that was clearly strongly rejected. It could be an interesting few weeks for the pair.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
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