GBP/USD plummets to near 1-week lows, around mid-1.2600s

• A goodish pickup in the USD demand triggers the initial leg of the intraday slide.
• Disappointing UK macro data/rising fears of a no-deal Brexit add to the selling bias.

The GBP/USD pair extended its steady intraday decline through the mid-European session and tumbled to four-day lows, closer to mid-1.2600s in the last hour.

Having failed to capitalize on Friday's post-NFP uptick to levels beyond mid-1.2700s, the pair came under some renewed selling pressure on the first day of a new trading week and the initial leg of downtick was led by a goodish pickup in the US Dollar demand.

The US President Donald Trump's announcement to suspend plans to impose tariffs on Mexico boosted the global risk sentiment and was evident from a solid rebound in the US Treasury bond yields, which helped ease the recent USD bearish pressure.

The British Pound was further weighed down by Monday's disappointing release of the UK macro data, showing that the economy contracted for the second consecutive month in April and the 0.4% decline was the largest since March 2016. 

The pair was further pressurized by the fact that all the leading candidates for the next British PM - Boris Johnson, Andrea Leadsom, Jeremy Hunt and Dominic Raab, all pursuing a pledge to leave the EU on 31 October even without a deal. 

The intraday slide took along some short-term trading stops being placed around the 1.2700 handle and hence, possibilities of some follow-through technical selling also seemed to be one of the key factors further contributing to the pair's heavily offered tone.

It would now be interesting to see if the pair is able to find any buying interest at lower levels or the current pullback marks the end of the recent corrective bounce and the resumption of the prior bearish trend amid relatively thin US economic docket. 

Technical levels to watch

As Yohay Elam, FXStreet's own Analyst writes – “Further support awaits at 1.2670 which was a support line last week and coincides with the 50 SMA. It is closely followed by 1.2640 that marks the beginning of uptrend support, then by 1.26010 which cushioned GBP/USD in early June and late May, and finally at 1.2558 that is the lowest level in four months.”

“Resistance awaits at 1.2750 which was the former triple top, before Friday's rally which sent it 1.2762. Further up we find 1.2815 and 1.2870. Momentum is turning negative and the Relative Strength Index is leaning lower,” he added further.