The cable broke below the 1.20 psychological level for the first time since early September on Wednesday. The selling pressure has intensified amid a broad-based dollar demand these days as risk aversion continues on the back of the coronavirus outbreak.
GBPUSD has been in a steep decline for the seventh consecutive day, and it looks like the pair will extend the losses at least in the short term. the pound failed to capitalize on the recent recovery attempts and turned even lower, suggesting the buyers are not ready to reenter the game just yet. Moreover, the greenback derives support from a rebound in the US Treasury bond yields.
Of note, the sterling struggled to find significant support from the UK government’s decision to unveil a nearly $400 billion stimulus package, as traders assess the country’s approach to the coronavirus outbreak as too cautious and modest. Also, much of the downside pressure on the pound comes from growing expectations for a fresh portion of quantitative easing at the Bank of England. As a reminder, a few central banks took steps to shield the global economy from the impending recession amid the coronavirus outbreak.
Despite the subsequent bounce, the fact that the pair broke below the 1.20 important figure suggests there could be additional losses ahead, and traders may start positioning to further weakness. Should the cable fail to hold above the psychological level on a daily closing basis, the 1.1960 support area will come into focus. On the upside, 1.2130 acts as the immediate important resistance.
Meanwhile, EURGBP continues to rally and registered fresh mid-August highs around 0.9170 on Wednesday amid broad-based weakness in sterling. The cross has been rising for a fifth week in a row already and it looks like the prices will gain further in the near term despite the overbought conditions. Now, the next upside target arrives at 0.92. On the downside, the pair may get below 0.91 in case of a bearish correction.