GBP/USD takes a sharp U-turn, dives to 1.2940

The GBP/USD pair failed to chew strong offers placed near multi-month tops reached on Monday at 1.2992, plunging almost 50-pips to now trade near the mid-point of 1.29 handle.

GBP/USD: 1.2990/1.3000 – A tough nut to crack

The spot trims gains and remains within a striking distance of daily lows, in response to a sudden buying-wave that gripped the greenback across the board, as USD shorts unwinding extends into Europe after the recent drop.

Moreover, markets refrain from creating fresh positions in cable above 1.3000 – psychological mark ahead of the BOE monetary policy decision and inflation report due tomorrow. Analysts at TDS note, “A lone Forbes dissent could also mitigate any hawkish undertones which leaves GBP vulnerable to a pullback given the shift in market positioning and recent repricing of risk,” adding that they would like to “fade GBP-USD on rallies into $1.30.”

The latest leg down in the GBP/USD pair can be also attributed to cross-driven weakness amid resurgent JPY demand across the fx board, which sent GBP/JPY sharply lower t0 147.45 levels.

The major now awaits the ECB President Draghi’s speech for any ‘rub-off’ on the pound ahead of the US import prices data and Fedspeaks.

GBP/USD Levels to consider            

A break above 1.2961 (May 9 high) could lift the pair above 1.2990 (7-week high), beyond which a test of 1.3025 (classic R3) is imminent. Conversely, a break below 1.2932 (daily low/ 10-DMA), leading to a subsequent break below 1.2900 (round figure) is likely to drag the pair towards testing its next support near 1.2886 (20-DMA).