- A combination of factors prompted some aggressive intraday selling around GBP/USD.
- Fresh Brexit worries, a strong pickup in the USD demand both contributed to the slide.
- A subsequent fall below weekly lows will set the stage for further near-term weakness.
The GBP/USD pair dived to daily lows during the early North American session, with bears now eyeing a sustained break below the 1.3100 round-figure mark.
Following an early uptick back closer to YTD tops, the pair witnessed a dramatic turnaround and has now eroded a major part of the previous day’s positive move. Negative Brexit-related headlines triggered the initial leg of the intraday slide, which accelerated further in the wake of a strong pickup in the US dollar demand.
The British pound met with some fresh supply after the EU’s chief negotiator Michel Barnier said that the seventh round of Brexit talks failed to yield any breakthrough. Barnier’s UK counterpart, David Frost also mentioned about the deadlock, suggesting weeks of uncertainty ahead. This, in turn, took its toll on the sterling.
On the other hand, a sharp turnaround in the global risk sentiment – as depicted by a steep decline in the equity markets – forced investors to take refuge in the safe-haven greenback. A broad-based USD strength was seen as another factor that contributed to the GBP/USD pair’s sharp intraday slide of over 150 pips.
It will now be interesting to see if the pair continues to attract some dip-buying at lower levels or weakens further to retest weekly lows support near the 1.3065 region. Some follow-through selling will confirm a near-term breakdown and turn the pair vulnerable to accelerate the slide further towards challenging the key 1.3000 psychological mark.
Market participants now look forward to the US economic docket, featuring the release of flash Manufacturing and Services PMI print. The data, along with the broader market mood will influence the USD price dynamics and produce some meaningful trading opportunities.
Technical levels to watch
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