GBP/USD Price Analysis: Flirts with 1.1235-40 confluence, bearish flag spotted on H4

• GBP/USD turns lower for the second straight day amid the emergence of some USD buying.
• Aggressive Fed rate hike bets and the risk-off mood acts as a tailwind for the safe-haven buck.
• The formation of a bearish flag supports prospects for the resumption of the pair’s downtrend.

The GBP/USD pair meets with a fresh supply following an uptick to the 1.1385 region and turns lower for the second successive day on Thursday. The downtick drags spot prices to mid-1.1200s, closer to the overnight swing low during the mid-European session and is sponsored by the emergence of some US dollar dip-buying.

Several Fed officials reaffirmed the US central bank's commitment to bring inflation under control and the prospects for another supersized 75 bps lift-off in November. This remains supportive of elevated US Treasury bond yields, which, along with growing recession fears, continue to act as a tailwind for the safe-haven greenback.

From a technical perspective, the 1.1235 area marks confluence support comprising the 200-period SMA and the 23.6% Fibonacci retracement level of the recent bounce from an all-time low. A convincing break below will suggest that the corrective rally has run out of steam already and shift the bias back in favour of bearish traders.

The GBP/USD pair might then turn vulnerable to weaken further below the 1.1200 mark and accelerate the downfall towards testing the 1.1100 round figure. The latter coincides with the lower end of a nearly two-week-old ascending trend channel, which now seems to constitute the formation of a bearish flag pattern on hourly charts.

Some follow-through selling, leading to a subsequent slide below the 38.2% Fibo. level around the 1.1050-1.1045 area will confirm the negative outlook and prompt aggressive technical selling. The downward trajectory could then drag the GBP/USD pair towards 50% Fibo. level, around the 1.0900 round-figure mark.

On the flip side, the 1.1375-1.1385 region now seems to have emerged as an immediate hurdle ahead of the 1.1400 mark. Sustained strength beyond should allow the GBP/USD pair to aim back to conquer the 1.1500 psychological mark, above which bulls might target the ascending channel resistance, currently around the 1.1625 zone.

GBP/USD 4-hour chart

Key levels to watch