GBP/USD quickly reverses a dip to sub-1.2100 level, fresh weekly lows
- A goodish pickup in the USD demand triggered the initial leg of the pair’s intraday slide.
- Reports that the UK PM Johnson could face a confidence vote further weighed on the GBP.
- The lack of follow-through USD buying helped limit further losses and bounce off daily low.
The GBP/USD pair extended its sharp intraday pullback and momentarily slipped below the 1.2100 handle - fresh weekly lows - in the last hour, albeit quickly retreated few pips thereafter.
After an early European session spike to the 1.2180-85 region, the pair met with some aggressive selling and retreated nearly 90-pips intraday. The initial leg of the slide was triggered by a modest pickup in the US Dollar demand, which extracted some support from a sharp recovery in the US Treasury bond yields.
UK political headlines add to the intraday selling
The downward spiral accelerated further in reaction to the Financial Times report - citing a senior 10 Downing Street official - that the UK PM Boris Johnson was expected to face a confidence vote after lawmakers return from recess. The official further added that if they are forced to hold a general election, it would take place days after Brexit deadline of October 31.
Meanwhile, a sudden pick up in the shared currency kept a lid on any strong follow-through USD up-move and helped limit further losses, rather quickly recover around 20-30 pips from an intraday low level of 1.2095. News that Germany was considering the issuance of new debt to finance the climate protection package triggered some aggressive short-covering move around the common currency and weighed on the greenback.
It would now be interesting to see if the pair is able to capitalize on the recovery move or Thursday's downfall marks a fresh bearish breakdown, which might pave the way for an extension of the recent downward trajectory further towards challenging the key 1.20 psychological mark during the upcoming trading sessions.
Technical levels to watch