GBP/USD Price Analysis: Eyes 1.3680 downside target as sell-off extends

• GBP/USD extends a three-day downtrend, downside risks persist.
• Rising wedge breakdown was confirmed on the daily sticks last Friday.
• RSI points south below the midline, suggesting more weakness ahead.

GBP/USD is attacking 1.3700, reaching the lowest levels in four weeks, as the buying pressure around the US dollar remains unabated amid the risk-off market mood.

The safe-haven US dollar continues to benefit from a potential default story of China’s Evergrande, which could lead to a financial crisis in the world’s second-largest economy.

Meanwhile, the Fed’s tapering expectations combined with the UK-US spat over the Northern Ireland (NI) protocol adds to the downward pressure on the cable.

Looking at GBP/USD technically, the price is extending its losing streak into the third straight session, as sellers now target the August 28 low of 1.3680.

The sell-off gathered traction after the pair closed Friday below the critical rising trendline support at 1.3788, validating a rising wedge breakdown on the daily chart.

A daily closing below the 21-DMA, then at 1.3780, added credence to the move lower.

The 14-day Relative Strength Index (RSI) points south below the midline, suggesting that the weakness is likely to extend in the near term.

If the abovementioned support gives way, then a sharp drop towards the 1.3650 psychological level cannot be ruled out.

GBP/USD: Daily chart

Alternatively, the GBP bulls need to recapture the 21-DMA, now at 1.3783, to unleash the additional upside.

Further up, the 1.3800 figure will challenge the bearish commitments. That level is the confluence of the wedge support, 50-DMA. The next significant hurdle is aligned at the 200-DMA of 1.3838.

GBP/USD: Additional levels to consider