GBP/USD Forecast: Sell-off to accelerate below mid-1.2800s, BoE Inflation Report hearings in focus

The GBP/USD pair opened with a bearish gap on Monday and was hit by the EU chief Brexit negotiator Michel Barnier's comments over the weekend. Barnier strongly opposed the UK PM Theresa May's Chequers plan and said it’s not practical. Making it worse for the British Pound, the UK manufacturing PMI dropped to a 25-month low level of 52.8 in August and kept exerting downward pressure on the major. 

The pair did find some support ahead of mid-1.2800s, albeit struggled to register any meaningful recovery amid growing global trade tensions. Market concerns were visible from the reaction in emerging market currencies, which eventually benefitted the US Dollar's safe-haven status and was seen exerting some downward pressure on the major.

Moving ahead, today's release of the UK construction PMI will be looked upon for some short-term trading opportunities but the key focus would be on the BoE Inflation Report hearing, where Governor Mark Carney's comments on the economy and interest rate might infuse a fresh bout of volatility across the GBP crosses. Another topic to watch from today's testimony is whether Carney will extend his term or not, which seems a definite question to be asked by lawmakers today.

From a technical perspective, last week's rejection slide from 50-day hurdle now seems to have pause near 50% Fibonacci retracement level of the 1.2662-1.3043 strong up-move. Should bulls fail to defend this, the pair seems more likely to accelerate the downfall further towards retesting the 1.2800 handle, also coinciding with 61.8% Fibonacci retracement level.

On the flip side, recovery attempts might now confront fresh supply near the 1.2900 handle (38.2% Fibonacci retracement level) and any subsequent up-moves are likely to remain capped near the 1.2930-35 region.