Market Data 
- GBP/USD holds steady on Tuesday amid subdued USD demand, albeit lacks bullish conviction.
- The divergent Fed-BoE policy expectations turn out to be a key factor acting as a headwind.
- The technical setup suggests that the path of least resistance for the pair is to the downside.
The GBP/USD pair struggles to capitalize on the overnight bounce from the 1.2300 mark, or its lowest level since November 14 and oscillates in a narrow band during the Asian session on Tuesday. Spot prices currently trade around mid-1.2300s, nearly unchanged for the day, and remain at the mercy of the US Dollar (USD) price dynamics.
Receding fears about a wider Middle East conflict remain supportive of a generally positive risk tone, which is seen undermining the safe-haven buck and lending some support to the GBP/USD pair. That said, growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer amid sticky inflation continues to act as a tailwind for the Greenback. Apart from this, speculations about more aggressive policy easing by the Bank of England (BoE) further contribute to capping the upside for the pair.
From a technical perspective, the recent breakdown through the 1.2540-1.2535 horizontal support and descending trend-channel support near the 1.2400 mark was seen as a fresh trigger for bearish traders. That said, the Relative Strength Index (RSI) on the daily chart is flashing oversold conditions. This makes it prudent to wait for some consolidation or a modest recovery before positioning for further losses. Nevertheless, the GBP/USD pair seems vulnerable to extending the downtrend from the YTD peak touched in March.
In the meantime, any meaningful recovery is likely to confront stiff resistance near the 1.2400 support breakpoint, which if cleared might trigger a short-covering rally and lift spot prices to the 1.2465-1.2470 region. The momentum could get extended further, though is more likely to remain capped near the 1.2500 psychological mark. The latter should act as a key pivotal point, above which the GBP/USD pair could surpass the 1.2535-1.2540 support-turned-resistance and aim to reclaim the 1.2600 round figure.
On the flip side, the overnight swing low, around the 1.2300 mark, now seems to protect the immediate downside. Some follow-through selling will reaffirm the negative bias and drag the GBP/USD pair to the next relevant support near the 1.2245 region en route to the 1.2200 round figure and the 1.2135 zone.
GBP/USD daily chart
