The British pound suffered its worst weekly loss against the US dollar since the Brexit referendum, with the GBP/USD losing nearly 800 points.
GBP to USD analysis shows that if the pair fails to hold above the 1.2200 level then sellers may test towards the 2019 low, around the 1.1950 level.
GBP/USD medium-term price trend
Sterling suffered a major triple digit decline last week as the Bank of England cut interest rates, and traders flocked back into the safety of the greenback.
Investors also factored in that 80 per cent of the GDP of the UK economy comes from the services sector, and the outbreak of the coronavirus could severely impact the domestic economy.
GBP/USD technical analysis shows that the pair needs to hold above the 1.2200 support level to avoid a major decline back towards the 1.1950 level.
The 1.2200 level is an area of extreme technical importance and a potential bounce spot for GBP/USD this week.
It is also noteworthy that the structure of a huge inverted head and shoulders pattern with over 1,000 points of upside potential is still valid while price trades above the 1.2000 level
GBP/USD short-term price trend
GBP/USD technical analysis shows that the pair has a strong short-term bearish bias while price trades above the 1.2830 level.
The one-hour time frame shows that a large head and shoulders pattern was activated last week, following the move below the 1.2720 level.
According to the size of the bearish pattern, the GBP/USD pair may be headed for a test of the 1.2200 level, which is aligned with medium-term analysis.
If a bounce from the 1.2200 level occurs traders may look to fade any GBP/USD rallies towards the 1.2500 technical area.
Gains above the 1.2830 would likely encourage the notion that a major bottom has formed this week. However, the current short-term trend remains heavily bearish until this scenario occurs.
GBP/USD technical summary
GBP to USD analysis shows that the GBP/USD pair could test the 1.2200 level before staging its next major move. Losses below the 1.2200 level could prompt a major test of the 2019 yearly low.