The GBP/USD pair has accelerated its trading losses as a flight to safety has seized the FX market. This USD safe-haven demand has been driven by the latest military move by President Vladimir Putin. He has called up 300,000 reservists into active duty in a move seen as a significant escalation of the ongoing Russia-Ukraine war. The move sends the USD index to two-decade highs and has caused accelerated losses on the GBP/USD, with just above two hours to the FOMC interest rate decision.
The market expectation of a 75 basis point move had already put some underlying strength on the US Dollar, driving the GBP/USD lower by 0.43% on Tuesday. Wednesday has brought further weakness to the pair, with a 0.41% loss that has sent the pair to levels not seen in decades.
Wednesday’s FOMC decision will also feature a speech by FOMC Chair Jerome Powell, in which markets will seek any possible hints as to how fast and by how much borrowing costs could rise in the last two meetings for 2022. Further hawkishness could drive the GBP/USD below its current 37-year lows.
The intraday selloff has driven the pair toward the 1.13323 price mark, the 27% Fibonacci extension level from the price high of 26 August to the swing low of 5 September. If the bulls fail to defend this support, the 61.8% Fibonacci extension at 1.11765 could become the next harvest point for the bears.
Any reprieve on the pair that follows a successful defence of 1.13323 will first encounter the 1.14538 price mark as initial resistance, where the 5 September low and 20 September high are located. If the bulls uncap this barrier, 1.16566 becomes the next possible target (29 August low). 1.18061 and 1.19014 (26 August high) are additional barriers to the north which become available if the retracement rally continues.