GBP/USD drops to session lows, inching back closer to mid-1.2600s
| • Brexit uncertainties continue to dent sentiment around the British Pound.
• A modest pickup in the USD demand adds to the renewed bearish pressure.
The GBP/USD pair extended its intraday retracement slide and dropped to fresh session lows, around the 1.2670-65 region in the last hour.
The pair failed to capitalize on its early uptick, rather met with some fresh supply near mid-1.2700s amid the UK political uncertainty and increasing odds of a no deal Brexit. There are very strong chances that the next UK PM will be a Brexiteer, forcing market participants to reassess the probability of a no-deal Brexit, and the fact that Brexit impasse will remain regardless of a new leader turned out to be one of the key factors weighing on the British Pound.
Meanwhile, investors now seemed to have digested the latest disappointment from the US durable goods orders data and a modest pickup in the US Dollar demand exerted some additional downward pressure on the major. The pair has now erased a major part of Friday's uptick and a follow-through weakness below mid-1.2600s might pave the way for a retest of 1.2600 handle - 4-1/2 month lows set last week.
Given that the US markets will be closed in observance of Memorial Day, relatively thin liquidity conditions might lead to some unusual volatility as the key focus remains on the leadership contest in the ruling Conservative Party, which remains deeply divided on the Brexit issue.
Technical levels to watch
As Yohay Elam, FXStreet's own Analyst explains: “GBP/USD is struggling with the 1.2685 line which provided support early last week. The next level to watch is 1.2650 that was a stepping stone on the way up. The fresh four-month of low of 1.2605 is the next line to watch. Some resistance awaits at 1.2710 that was a support line in mid-May. It is followed by 1.2750 which capped it earlier today and also two weeks ago.”
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