The GBPUSD is at risk of closing the day below the 1.2290 region.
If you watched Saturday’s Forex Forecast video, you know that 1.2290 was a “must hold” area for buyers.
It’s the intersection of ascending channel support from the year-to-date low and a horizontal level that has been a factor since late August.
In fact, the 1.2290 area has been influential as far back as October and November of 2016.
You also know from Saturday’s video post that I’m not surprised to see the pound breaking down today.
I pointed out the “heavy” price action above the 1.2290 support area in that video, noting that it often signals a breakdown.
A daily close below this area would signal weakness for GBPUSD.
It would also open the door to the next key support around 1.2170.
Furthermore, this week’s decline could be the start of the next leg lower within the broader downtrend.
Remember that GBPUSD has been trending lower since April 2018.
A look at the weekly or monthly time frames shows how the pound has actually been losing ground against the greenback since late 2007.
That means this latest relief rally could be nothing more than a mere correction following the impulsive selloff earlier this year.
Again, watch Saturday’s video to see how these corrections since the middle of last year have led to aggressive selloffs.
So, is this the beginning of the next selloff?
As long as GBPUSD remains below that 1.2290 region, I’d say the answer is, yes, at least from a purely technical perspective.
Key support comes in at 1.2170 with a close below that exposing the year-to-date lows near 1.2015.
Alternatively, a daily close back above 1.2290 would keep the relief rally intact a while longer.