GBP/USD falls to over 1-week lows and rebounds, back above 1.2500 mark

The GBP/USD pair lost some additional ground during the early North American session and dropped to over one-week lows, further below the key 1.2500 psychological mark.

The pair witnessed some heavy selling for the second consecutive session on Tuesday and extended the previous day's rejection slide from the 1.2665-70 strong horizontal resistance. The intraday slide followed the disappointing release of the UK monthly GDP report, which showed that the economy expanded by 1.8% in May as compared to consensus estimates pointing to a growth of 5%. This comes amid the lack of progress in the post-Brexit talks, which further took its toll on the British pound.

Meanwhile, concerns about deteriorating US-China relations and surging COVID-19 cases dented investors' appetite for riskier assets. This was evident from a fresh leg down in the equity markets, which benefitted the US dollar's relative safe-haven status and further contributed to the GBP/USD pair's downfall to the lowest level since July 7. The USD moved little after the latest US consumer inflation figures showed that the headline CPI rose by 0.6% in June as compared to 0.5% expected and -0.1% previous. The yearly rate matched expectations and came in at 0.6%.

Given the overnight breakthrough a three-day-old ascending trend-line, which coincided with 100-hour SMA, and a subsequent slide below 200-hour SMA was seen as a key trigger for bearish traders. Hence, Tuesday's downfall could also be attributed to some follow-through technical selling. Apart from this, some cross-driven weakness stemming from a strong follow-through move up in the EUR/GBP cross further seemed to have inspired bearish traders and took along some short-term trading stops near the 1.2500 mark. Hence, a subsequent slide towards testing 100-day SMA, around the 1.2425 region, now looks a distinct possibility.

Technical levels to watch