- GBP/USD witnessed strong selling for the third day in a row and fell to the 1.2700 mark.
- Dismal UK macro data on Friday weighed on the GBP and put pressure on amid a stronger USD.
- The extreme oversold conditions on the short-term charts prevented the bears from making further bets.
The pair GBP/USD remained under intense selling pressure for the third day in a row on Monday and fell to 1.2700, or its lowest level since September 2020 during the middle of the European session.
Sterling came under pressure from last week’s dismal macroeconomic data, which indicated that the UK economy is under pressure from runaway inflation. On the other hand, prospects of more aggressive policy tightening by the Fed pushed the US dollar to a more than two-year high and contributed to the heavily offered tone surrounding the GBP/USD pair.
From a technical perspective, the pair confirmed a new bearish break through the psychological mark of 1.3000 on Friday. The subsequent drop and acceptance below the 50% Fibonacci retracement level of the strong move higher from 1.1411-1.4249, around the 1.2800 mark, was seen as a new trigger for bearish traders and accelerated the intraday decline.
That said, the extremely oversold oscillators on the hourly/daily charts prevented traders from placing any new bets and helped the GBP/USD pair find some support near 1.2700. However, the intraday recovery attempt was met with fresh offers near the 1.2755 region. This, in turn, suggests that the short-term downtrend may still be far from over.
A convincing break below the 1.2700 mark, leading to a subsequent break through the September 2020 low around the 1.2675 region, will reaffirm the negative bias. The GBP/USD pair could become vulnerable to weaken further below the 1.2600 round figure and accelerate the decline towards the 61.8% Fibonacci level around the key psychological 1.2500 level.
On the other hand, the 1.2755-1.2760 region now seems to act as immediate resistance ahead of the 1.2800 mark. Any subsequent upside move is most likely to run out of steam near the 50% Finonacci level, around the 1.2825-1.2830 region, which should act as a pivot point. Sustained strength beyond could trigger a short-covering move in the near term.
GBP/USD daily chart
Technical levels
Source: Fx Street
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