“¢ Highly oversold conditions lend some support amid subdued USD demand.
“¢ Brexit-related UK political chaos might keep a lid on any attempted recovery.
The GBP/USD pair extended its sideways consolidative price action and remained well within the striking distance of three-month lows set on Friday.
The fact that the UK cross-party talks – aimed at breaking the Brexit stalemate, broke down without an agreement continued denting the already weaker sentiment around the British Pound and exerted some heavy downward pressure around the major on Friday.
Moreover, investors seemed convinced that the Brexit Withdrawal Agreement stands no chance to get parliament’s approval for the fourth time, which might eventually lead to the UK PM Theresa May’s early exit and a possible replacement with a pro-Brexit PM.
However, slightly oversold conditions held investors from placing any fresh bearish bets in absence of any fresh negative Brexit headlines and a subdued US Dollar demand, resulting into the consolidative price action through the mid-European session on Monday.
In the latest development, the UK government spokesman said that the Brexit legislation will be presented in the first week of June but there no firm date as to when it will happen and added to the uncertainty, which collaborated towards capping any attempted recovery.
With little or no major data due for release on Monday, the pair seems more likely to remain confined in a range as market participants now look forward to the Fed Chair Jerome Powell’s scheduled speech for some short-term trading impetus.
Technical levels to watch
Yohay Elam, FXStreet’s own Analyst writes: “Initial resistance awaits at 1.2775 that was a low point in February. It is followed by 1.2830 that provided temporary relief last week. April’s low of 1.2870 is next.”
“Initial support is at the fresh low of 1.2711, the lowest since January. The next cushion is at 1.2670, which was a swing low back then. Further down, we find 1.2610 which was a support line in December 2018,” he added further.
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