GBP/USD drops to fresh weekly low ahead of UK manufacturing data

A fresh bout of US Dollar buying interest emerged during early European session, with the GBP/USD pair extending its reversal from Tuesday's two-month peaks. 

Currently trading around 1.2625 region, few pips off weekly low near 1.2610 region, the pair came under fresh selling pressure amid resurgent greenback buying interest as investors now seems to build on a scenario where the pace of Fed rate-hikes in 2017 could be faster than already priced by the markets. Hence, focus would remain on next week's FOMC meeting, especially on the updated economic projections, 'dot-plots', which would help investors evaluated possibilities and timing of the next Fed rate-hike action in 2017 and eventually determine the next leg of directional move for the US Dollar. 

In the meantime, today's UK economic docket featuring the release of manufacturing and industrial production data for October will be in focus and might provide some impetus for short-term traders during European session.

From technical perspective, the pair on Tuesday was rejected from just below 100-day SMA resistance and hence, a subsequent drop below 1.2600 handle is likely to increase the pair's vulnerability to continue drifting lower in the near-term.

Technical levels to watch

On a sustained weakness below 1.2600 mark, the pair seems to immediately dart towards 1.2540-35 support area before the pair eventually breaks through 1.2500 psychological mark and head towards testing 1.2470-65 horizontal support. On the upside, 1.2675-80 zone (session peak) is likely to act as immediate hurdle above which the pair is likely to move back above 1.2700 handle and aim towards testing 1.2725 resistance area.