GBP/USD drops further under 1.3600 amid risk aversion and new restrictions in UK

• Pound under pressure across the board adds to losses.
• GBP/USD corrects lower after rising during three consecutive trading days.

The GBP/USD pair dropped further during the American session amid a stronger US dollar and as the pound remains under pressure. The pair bottomed at 1.3559, hitting the lowest since last Wednesday.

Earlier on Monday, cable reached levels above 1.3700 for the first time since April 2018 before reversing its intraday trend. The sharp decline from the top was triggered by a slide of the pound amid expectations of new restrictions in the UK. The government will deliver a statement on the subject. The increase in COVID-19 cases and the new strain offset the developments related to the Oxford/AstraZeneca vaccine.

Simultaneously, the US dollar recovered strength, and equity prices in Wall Street turned to the downside. As of writing, the Dow Jones falls by 1.60% and the Nasdaq by 1.25%. The reversal boosted the greenback that trimmed losses across the board.

From a technical perspective, the trend in GBP/USD still points to the upside, but the momentum eased. A consolidation below 1.3600 would favor an extension of the correction. Support levels are seen at 1.3550/55, followed by 1.3505 and 1.3425/30 (last week’s low).

Technical levels