GBP/USD hits fresh 21-months lows near 1.2600 as US dollar soars

• US dollar accelerates to the upside, DXY hits fresh two-year highs above 102.00.
• Risk aversion weighs on the pound, Nasdaq tumbles 3%.
• GBP/USD at lowest since July 2020, eyes 1.2600.

After a short-lived recovery, the GBP/USD pair resumed its downtrend, breaking under 1.2670. It bottomed at 1.2616, hitting the lowest level since July 2020.

Pound among worst performers

The pound is under pressure amid risk aversion. EUR/GBP trades at 0.8440, at the highest in three weeks, GBP/JPY bottomed at 160.40 (is down almost 300 pips for the day), and AUD/GBP is losing a hundred pips, reversing sharply from the monthly high it reached on Monday at 1.7885.

In Wall Street, the Dow Jones is falling by 1.46% and the Nasdaq tumbles by 3.10%. In Europe, the main stock indices are down 0.75% on average. Investors await earnings reports from Microsoft and Alphabet.

The dollar, measured by the US Dollar Index, trades with a gain of 0.41% at 102.15, the highest level since March 2020. At the same time, US yields are at weekly lows as demand for Treasuries surges on the back of the deterioration in market sentiment. The US 10-year bottomed at 2.72% and the 30-year at 2.83%.

Oversold, but who cares?

The GBP/USD is falling for the fourth consecutive day, accumulating a decline of more than 400 pips. Technical indicators are in oversold territory but no signs of a consolidation or a correction are seen.

The negative momentum in cable remains intact. The next resistance might be seen around 1.2600, followed by 1.2580. On the upside, resistance levels are seen at 1.2665, followed by 1.2700 and 1.2770.

Technical levels