GBP/USD drops to 2-week lows, eyeing 1.2600 mark amid notable USD demand

The GBP/USD pair continued losing ground through the early North-American session and tumbled to near two-week lows in the last hour, with bears now targeting the 1.2600 handle. 

The pair extended this week's rejection slide from the 1.2750-60 region and remained under some selling pressure for the third consecutive session amid persistent worries over a no-deal Brexit, especially after Thursday's result of the first ballot for Tory leadership contest showed that the leading candidate and a hardline Brexiteer Boris Johnson received an impressive 114 votes.

The pair was further pressurized by some renewed US Dollar buying interest, which picked up the pace following the release of monthly retail sales figures. The headline sales came in slightly weaker but the fact that ex-autos and control group sales bettered expectations, coupled with upward revisions of the previous month's readings weakened the case for an immediate rate cut move by the Fed and provided a goodish lift to the greenback.

Apart from the fundamental factors, Friday's downfall since the early European session could further be attributed to some technical selling on a sustained break below the previous weekly lows support near mid-1.2600s. Hence, a follow-through weakness, possibly towards retesting multi-month lows - around the 1.2560 region set on May 31, now looks a distinct possibility.

Technical levels to watch

As Yohay Elam, FXStreet's own Analyst writes – “1.2610 was a low point in early June. The next downside target is 1.2558 – May's bottom and the lowest since January. Momentum remains to the downside, the Relative Strength Index is leaning lower. Moreover, GBP/USD has lost the 100 Simple Moving Average after losing the 50 SMA earlier in the week.”

“Initial resistance awaits at 1.2680 which provided support on Thursday. Further up, 1.2705 was a high point on Thursday and provides further resistance. The most considerable cap is at 1.2765 which held the pair down twice in recent weeks – a double top,” he added further.