GBP/USD hangs near multi-month lows, focus remains on UK politics

The GBP/USD pair extended its sideways consolidative price action and remained within the striking distance of 5-1/2 month lows set earlier this Tuesday.

After the previous session's rejection slide from the 1.2600 handle, the pair dropped to the vicinity of the key 1.2500 psychological mark during the Asian session on Tuesday on reports that the UK Chancellor of the Exchequer (Finance Minister) Hammond is prepared to resign due to his disagreement over the Prime Minster May's spending plans. 

This coupled with the fact that hardline Brexiteer Boris Johnson is still seen as a leading candidate to be Britain's next Prime Minister continued denting the already weaker sentiment surrounding the British Pound, albeit a combination of factors held investors from placing any aggressive bets and collaborated to the pair's range-bound price action. 

Investors now seemed to wait for the outcome of the second round of voting for the Tory leadership before positioning for any meaningful intraday move. Meanwhile, the US Dollar failed to gain any strong traction amid firming expectations that the Fed will eventually move towards cutting interest rates by the end of this year, which further collaborated towards lending some support. 

Apart from the incoming UK political headlines, traders will confront the release of US housing market data - housing starts and building permits, which followed by the BoE Governor Mark Carney’s speech at the ECB Forum in Sintra might further contribute towards producing some meaningful trading opportunities later this Tuesday.

Technical levels to watch

Yohay Elam, FXStreet's own Analyst offers important technical levels to watch for and writes – “Initial support awaits at 1.2510 which is the fresh five-month low seen early in the day. Further down, 1.2475 was a stubborn support line in December 2018 and 1.2445 was the low point in early January.” 

“Initial resistance awaits at 1.2558 which was the previous 2019 low set in late May. Next up, 1.2605 capped GBP/USD on Monday and serves as resistance. 1.2640 which provided support in early June and 1.2660 that held it up last week are next,” he added further.