GBP/USD hits 4-week low as USD continues to gain traction

The GBP/USD pair built on Monday's rejection move from 1.2500 psychological mark and touched a four-week low level, closer to 1.2300 handle. 

Currently trading around 1.2330-25 band, having posted a session low at 1.2313, the pair remained under intense selling pressure for the second consecutive day amid broad based greenback strength, with the overall US Dollar Index hitting a fresh 14-year high. 

Growing expectations of aggressive fiscal stimulus measures by Trump administration would spur growth and lift inflation has been fueling speculations of faster Fed rate-tightening cycle. The expectations were reinforced by last week's hawkish Fed outlook, now projecting three rate-hikes in 2017 against two-hikes forecasted previously. 

The prevalent bullish sentiment surrounding the greenback seems strong enough to continue dragging the pair and hence, a move back towards multi-decade lows near 1.20 psychological mark could still be a possibility.

Technical levels to watch

Valeria Bednarik, Chief Analyst at FXStreet, notes, "Technically, the pair is struggling at a major level, and if sellers finally give up, the bearish momentum will likely accelerate this Tuesday. In the 4 hours chart, the price is below a sharply bearish 20 SMA while the RSI indicator heads south around 30, supporting some further slides, on renewed selling interest below the 1.2330 region."

"Support levels: 1.2330 1.2290 1.2250
Resistance levels: 1.2375 1.2425 1.2460"