GBP/USD plunges to 1-1/2 week lows, below mid-1.2700s

   “¢   Persistent Brexit uncertainties kept the GBP bulls on the defensive.
   “¢   Resurfacing US-China trade tensions boost USD’s safe-haven status.
   “¢   Technical selling below 1.2800 handle adds to the selling pressure.

The GBP/USD pair finally broke down of its Asian session consolidation phase and tumbled to 1-1/2 week lows, further below mid-1.2700s in the last hour.

The latest Brexit optimism, led by a formal approval of the UK withdrawal agreement at the special EU summit on Sunday, was overshadowed by market expectations that the British parliament will vote down May’s Brexit deal and kept denting sentiment surrounding the British Pound.

Adding to this, a goodish pickup in the US Dollar demand, further supported by resurfacing US-China trade tensions, prompted some fresh selling on Tuesday. The US President Donald Trump, in an interview with the Wall Street Journal, threatened to move ahead with raising tariffs on $200 billion in Chinese imports to 25% from 10% currently.  

Fresh concerns about the US-China trade war did ease after China’s Foreign Ministry spokesman Geng Shuang said that Trump and Xi have agreed to reach mutually beneficial agreements. However, a subsequent clarification, saying that the agreement refers to Nov. 1st Trump-Xi phone call, triggered a fresh wave of global risk-aversion trade and continued underpinning the greenback’s relative safe-haven status.

The pair came under some fresh selling pressure, with possibilities of some short-term trading stops being triggered on a sustained break below the 1.2800-1.2795 region, further aggravating the bearish pressure since the early European trading session. Hence, a follow-through weakness, back towards challenging the 1.2700 handle, now looks a distinct possibility amid absent relevant market moving economic releases.

Technical levels to watch

Immediate support is pegged near the 1.2725 level, below which the pair is likely to accelerate the fall towards the 1.2700 handle before eventually dropping to YTD lows, around the 1.2665-60 region. On the flip side, the 1.2795-1.2800 region now seems to act as an immediate strong hurdle, above which the pair is likely to aim towards retesting the 1.2875-80 supply zone.