GBP/USD hangs near YTD low, below 1.3300 mark amid Ukraine crisis/stronger USD

• GBP/USD dropped to the lowest level since December on Wednesday amid renewed USD buying.
• The Russia-Ukraine conflict weighed on investors’ sentiment and benefitted the safe-haven buck.
• Some follow-through selling below the 1.3270 support zone will set the stage for a further decline.

The GBP/USD pair extended its steady intraday descent through the early European session and dropped to a fresh 2022 low, around the 1.3270 region in the last hour.

Following an early uptick to the 1.3340 area, the GBP/USD pair met with a fresh supply and turned lower for the second successive day on Wednesday amid renewed US dollar buying interest. Worries about the impact of aggressive sanctions against Russia and the worsening situation in Ukraine continued weighing on investors' sentiment. This was evident from a fresh leg down in the equity markets, which, in turn, was seen as a key factor that benefitted the safe-haven greenback.

In fact, reports indicated that Russia has intensified the bombardment of Ukrainian cities and a large Russian convoy was approaching the capital Kyiv. Apart from this, a goodish rebound in the US Treasury bond yields extended additional support to the buck. That said, diminishing odds for a 50 bps Fed rate hike move in March held back the USD bulls from placing aggressive bets and helped limit any deeper losses for the GBP/USD pair, at least for the time being.

The recent developments surrounding the Russia-Ukraine saga dashed hopes for a more aggressive policy response by the Fed to combat stubbornly high inflation. This was evident from the recent sharp decline in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond tumbled to its lowest level since January 24 on Tuesday. This, in turn, warrants caution before positioning for any further depreciating move for the GBP/USD pair.

From a technical perspective, acceptance below the 1.3300 round figure could be seen as a fresh trigger for bearish traders. The GBP/USD pair, however, found some support near the 1.3270 region, which should now act as a key pivotal point. A convincing break below will reaffirm the bearish bias and set the stage for a slide towards testing the 1.3200 mark. The downward trajectory could further get extended towards 2021 low, around the 1.3160 region.

There isn't any major market-moving economic data due for release from the UK, leaving the GBP/USD pair at the mercy of the USD price dynamics. Later during the early North American session, traders might take cues from the US ADP report and the Fed Chair Jerome Powell's semi-annual testimony before the House Financial Services Committee. The focus, however, will remain on geopolitical headlines amid the resumption of the Russia-Ukraine talks on Wednesday.

Technical levels to watch