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GBP/USD at Risk of Further Losses

May 10, 2022

  • GBP/USD extended its decline after breaking below support at 1.2400.
  • Bearish trend line has formed resistance near 1.2540.

The British Pound, US Dollar pair started a major decline after testing the 1.3000 resistance level. GBP/USD broke below the 1.2620 support level and continued to decline. 

GBP/USD 4-Hour Chart (Trend: BEARISH)

On the 4-hour chart, the GBP/USD pair broke below the 1.2500 level and both the 100-MA (red) and 200-MA (blue). There was also a break below the 1.2300 level, with the pair trading as low as 1.2261. The quote then corrected higher, testing the 1.2400 resistance level. It has since taken a pause near the 23.6% Fibonacci retracement level of the downward move from the swing high of 1.2638 to the swing low of 1.2261.

If the pair turns bullish, the quote will first need to test resistance near the 1.2450 level. This is also close to the 50% Fibonacci retracement level (of the 1.2638 high to the 1.2261 low). Above this there is further resistance near the 1.2550 level. There is also a key bearish trend line forming resistance near 1.2540. A break above the 1.2550 level could see momentum take the quote up towards 1.2700.

In contrast, for the pair to continue bearish, the quote will first need to test support near the 1.2260 level. Below this there is further support near 1.2200. Further losses could see the quote drop down towards support at 1.2050, a level last seen in March 2020.

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