GBP/USD retreats further below mid-1.2100s, reverses Tuesday’s positive move

• Persistent Brexit-related uncertainties exert some fresh pressure.
• A pickup in the USD demand adds to the prevalent selling bias.
• Focus remains on Johnson’s meeting with Merkel/FOMC minutes.

The GBP/USD pair edged lower through the early European session on Wednesday and eroded a major part of the previous sessions’ goodish intraday up-move.
 
The pair on Tuesday witnessed a dramatic turnaround and rallied over 100-pips intraday in reaction to German Chancellor Angela Merkel’s comments, which revived hopes that the EU is willing to discuss an alternative and might also make some concessions to avoid a no-deal Brexit.

Brexit remains the name of the game

However, the fact that the European Union (EU) negotiators have ruled out possibilities of any renegotiation of the withdrawal agreement and refused to accept the UK PM Boris Johnson’s request to remove the Irish backstop clearly points to differences between the two parties.
 
The same was further reaffirmed by the latest comments from Irish Foreign Minister Simon Coveney, saying that the UK government position on Brexit is now less compromising and seemed to be one of the key factors prompting some fresh selling around the major.
 
On the other hand, the US Dollar managed to regain some positive traction in the wake of a goodish pickup in the US Treasury bond yields – supported by the prevalent risk-on mood – which further collaborated to the pair’s slide to daily lows around the 1.2130-25 region.
 
Moving ahead, Wednesday’s key focus will remain on the UK PM Johnson’s scheduled meeting with his Germany counterpart Merkel for fresh updates on the likely Brexit outcome, which might eventually influence the GBP price dynamics later this Wednesday.
 
Investors will also confront the important release of the latest FOMC meeting minutes, which is likely to play a key role in driving the near-term sentiment surrounding the USD and contribute towards producing some meaningful trading opportunities.

Technical levels to watch