It looks like the prices would lack the recovery momentum to regain the 1.3200 mark as the USD demand will likely reemerge after some profit-taking
The cable failed to hold above the 1.3300 handle last week and keeps bleeding these days, extending losses to fresh November lows below 1.3100 on Tuesday. the pair dipped to 1.3080 before rebounding slightly as the dollar has retreated somewhat from fresh long-term highs in recent trading. Still, downside risks continue to persist as the safe-haven greenback will likely challenge the 100.00 mark in the coming days.
Russia-Ukraine crisis keeps intensifying as a third round of talks between the conflicting countries failed to bring any significant progress, with the rest of the world introducing fresh harsh sanctions against Russia. Against this backdrop, risk aversion continues across the markets, hurting high-yielding assets including sterling.
As such, it looks like the GBPUSD pair could derail the 1.3000 psychological level in the near term for the first time since November 2020, as the prices failed to hold above the 1.3160 December 2021 lows at the start of the week. In the immediate term, the USD could cap gains for the pair amid the worsening situation in Ukraine. The nearest barrier arrives at 1.3130, followed by the 1.3175. However, it looks like the prices would lack the recovery momentum to regain the 1.3200 mark as the USD demand will likely reemerge after some profit-taking.
The Bank of England could provide some support for the cable later this month as the central bank is expected to hike interest rates again. However, the Fed could also strengthen the greenback next week as the monetary authorities will hike rates and could express a rather hawkish tone in the context of further tightening amid rising inflation, fueled by soaring commodity prices.