GBP/USD eyes a test of 50-DMA support at 1.2965

After a brief phase of consolidation above 1.30 handle witnessed during Asia, the GBP/USD pair ran into fresh offers and broke below the last in Europe, in the wake of fresh Brexit jitters and broad based US dollar recovery.

GBP/USD breaches 1.3000, what’s next?

The spot stalled its recovery mode from Friday’s slump and dropped back into the red zone in the European session, as a risk-on rally in the European equities boosted the demand for higher-yielding assets such as Treasury yields, which in turn provided extra legs to the recovery in the US dollar against its main competitors. Treasury yields rally +1% to 2% across the curve, while the USD index climbs +0.28% to 93.26, daily tops.

Moreover, the pound also came under fresh selling pressure, as fresh concerns over the Brexit issue returned to markets, after the Welsh nationalist party joined Scotland in opposing the UK Government to pass the EU legislation into UK laws.

Furthermore, increased nervousness ahead of Tuesday’s UK CPI, especially after the recent series of the UK economic releases failed to impress the GBP markets, also exerts bearish pressure on Cable.

Nothing of relevance in terms of the economic news due later today, and hence, focus remains on the UK CPI and US retail sales data slated for release tomorrow.

GBP/USD levels to consider             

Haresh Menghani, Analyst at FXStreet noted: “Bulls would eyeing for a strong follow through buying interest beyond 1.3030 immediate hurdle, above which a fresh bout of short-covering could assist the pair to aim back towards reclaiming the 1.3100 handle. Conversely, any pull-back below 1.2975 horizontal support might continue to find strong support near mid-1.2900s.”