GBP/USD breaks below 1.26 on sustained dollar demand

A second wave of dollar buying pushed the GBP/USD pair to a session low of 1.2580 as Yellen’s balancing act failed to overshadow the hawkish dot plot projections.

Bearish inverted hammer and bearish follow through

In terms of technical patterns, the daily chart now has a bearish inverted hammer (Tuesday’s candle) followed by a bearish follow through i.e. a drop to 1.2580 on hawkish Fed.

Fed chair Yellen did downplay the adjustment to interest rate projections, but markets took notice of the fact that Yellen did not mention data dependency or downside risks to the economy. That may have boosted the morale of dollar bulls, thus leading to a drop in the GBP/USD pair.

The action in the short-end of the treasury yields could continue to influence the pair.

GBP/USD Technical Levels

A break below 1.2566 (4-hr 100-MA) could yield a sell-off to 1.25 (zero figure) - 1.2485 (4-hr 200-MA), under which a major support is seen directly at 1.2514 (50-DMA). On the other side, 1.2613 (5-DMA) and 1.2641 (10-DMA) could offer resistance, which, if breached would open the door to 1.27 (zero figure).