Search ForexCrunch

   “¢   Resurgent USD demand triggers the initial leg of the retracement slide.
   “¢   Fading Brexit optimism exerts some additional downward pressure.

The GBP/USD pair remained heavily offered through the mid-European session, albeit has managed to rebound around 20-pips and is currently trading around mid-1.3000s.

A combination of negative factors prompted some aggressive selling at the start of a new trading week, with the pair eroding a major part of Friday’s strong up-move back above the 1.3100 handle.  

A goodish pickup in the US Dollar demand, supported by firming prospects for gradual Fed rate hike through the end of this year and beyond, triggered the initial leg of retracement slide from over one-week tops.  

This coupled with fading Brexit optimism, following comments by the UK PM spokesman James Slack, provide any precise data for the publication of the Irish backstop proposal, exerted some additional downward pressure on the British Pound.

Meanwhile, a fresh wave of global risk-aversion trade, triggered by resurfacing US-China trade tensions and Italian debt concerns benefited the greenback’s safe-haven status against its British counterpart and further collaborated towards accelerating the downward momentum.

It would now be interesting to see if the pair is able to catch any bids at lower levels or continues drifting lower amid relatively thin liquidity conditions on the back of a holiday in the US markets.  

Technical levels to watch

Any follow-through weakness is likely to find support near the key 1.30 psychological mark, which if broken might turn the pair vulnerable to fall back towards testing the 1.2925-20 strong horizontal support.

On the flip side, recovery attempts might now confront some fresh supply near the 1.3100 handle, above which the pair seems set to resume with its appreciating move and aim towards testing the 1.3175-80 supply zone.