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  • GBP/USD came under intense selling pressure on Tuesday and dropped to multi-week lows.
  • A strong pickup in the USD demand was seen as a key factor exerting downward pressure.
  • Technical selling below the 1.3800 mark further contributed to the steep intraday decline.

The GBP/USD pair witnessed some aggressive selling during the first half of the European session and dived to six-week lows, around the 1.3770 region in the last hour.

The pair came under some heavy selling pressure on Tuesday and finally broke down of the overnight consolidative trading range amid resurgent US dollar demand. Against the backdrop of the upbeat US economic outlook, a sharp fall in the equity markets provided a strong lift to the safe-haven USD.

The global risk sentiment took a hit after Western countries imposed sanctions on Chinese officials for human rights abuses in Xinjiang. Apart from this, reports that North Korea is deploying multiple rocket launchers on the inter-Korean border islet of Chagrin further dented investors’ confidence.

On the other hand, the British pound was weighed down by concerns that a significant shortage in vaccine supplies could derail the UK government’s plan to exit the current lockdown. It is worth mentioning that the EU reportedly is set to block exports of Oxford-AstraZeneca vaccines to the UK.

Tuesday’s mixed UK employment details also did little to impress the GBP bulls or provide any meaningful impetus to the GBP/USD pair. In fact, the UK unemployment rate dropped to 5% in January, while the number of people claiming unemployment-related benefits jumped to 86.6K in February.

Meanwhile, the latest leg of a sharp drop over the past hour or so could further be attributed to some technical selling on a sustained break below the 1.3800 mark. Given the recent failures near the key 1.4000 psychological mark, the downfall might have already set the stage for additional weakness.

Market participants now look forward to Fed Chair Jerome Powell and Treasury Secretary Janet Yellen’s joint testimony before the Financial Services Committee later this Tuesday. In their prepared remarks released on Monday, both Powell and Yellen painted an optimistic picture for the US economy.

In the absence of any major market-moving economic releases, any further hawkish shift should be enough to provide an additional boost to the greenback. This, in turn, should pave the way for a further near-term depreciating move for the GBP/USD pair, possibly towards the 1.3700 mark.

Technical levels to watch