• Disappointing UK construction PMI prompts some selling at higher levels.
• A modest pickup in the USD demand further adds to the downward pressure.
• Technical selling below Asian session lows further accelerates the intraday slide.
The GBP/USD pair quickly reversed an early European session spike to 1.3255 area and dropped to fresh session lows in the last hour, filling the weekly bullish gap.
After consolidating through the Asian session on Monday, the pair ticked higher and remained supported by firming expectations of a possible delay to the fast-approaching Brexkt deadline on March 29/softer Brexit.
The uptick, however, lacked any strong bullish conviction, rather remained capped on the back of today's disappointing release of UK construction PMI print that fell to an 11-month low level of 49.5 in February.
Adding to this, a modest pickup in the US Dollar demand, supported by the NY Times report that Huawei is preparing to sue the US government, further collaborated towards exerting some downward pressure on the major.
Meanwhile, the latest leg of a sudden drop over the past hour or so could further be attributed to some technical selling below the 1.3230-25 horizontal support, with bears now eyeing a break below the 1.3200 handle.
In absence of any major market moving economic releases, the USD price dynamics might influence the price action amid relatively lighter Brexit-related news-flow ahead of Barnier -Cox -Barclay meeting on Tuesday.
Technical outlook
Mario Blascak, FXStreet's own European Chief Analyst: “The technical oscillators including Momentum and the Relative strength index are elevated and pointing upwards while Slow Stochastics made a bearish crossover within the Overbought territory. The most important technical feature though is the golden cross of the 50-day moving average crossing over the 100-day moving average (DMA).”
“The golden cross is a strongly bullish technical signal that is expected to push Sterling higher long-term. In the short-term, the GBP/USD though is in corrective mode around mid 1.3200s before testing 1.3215, previous cyclical high. On the upside, the immediate target is at 1.3390 representing 61.8% Fibonacci retracement of post-Brexit recovery from 1.1800 to 1.4374,” he added.
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