• GBP/USD witnessed heavy selling for the third successive day and tumbled to the 1.2700 mark.
• Friday’s dismal UK macro data weighed on the GBP and exerted pressure amid stronger USD.
• Extremely oversold conditions on short-term charts held back bears from placing fresh bets.

The GBP/USD pair remained under intense selling pressure for the third successive day on Monday and plunged to the 1.2700 mark, or its lowest level since September 2020 during the mid-European session.

The British pound was pressured by last week's dismal macro data, which indicated that the UK economy is under stress from the soaring inflation. On the other hand, the prospects for a more aggressive policy tightening by the Fed pushed the US dollar to a more than two-year high and contributed to the heavily offered tone surrounding the GBP/USD pair.

From a technical perspective, the pair on Friday confirmed a fresh bearish breakdown through the 1.3000 psychological mark. The subsequent downfall and acceptance below the 50% Fibonacci retracement level of the 1.1411-1.4249 strong move up, around the 1.2800 mark, was seen as a fresh trigger for bearish traders and accelerated the intraday decline.

That said, extremely oversold oscillators on hourly/daily charts held back traders from placing fresh bets and assisted the GBP/USD pair to find some support near the 1.2700 mark. The attempted intraday recovery, however, met with a fresh supply near the 1.2755 region. This, in turn, suggests that the near-term bearish trend might still be far from being over.

A convincing break below the 1.2700 mark, leading to a subsequent break through the September 2020 low, around the 1.2675 region, will reaffirm the negative bias. The GBP/USD pair might then turn vulnerable to weaken further below the 1.2600 round figure and accelerate the slide towards the 61.8% Fibo. level, around the key 1.2500 psychological mark.

On the flip side, the 1.2755-1.2760 region now seems to act as an immediate resistance ahead of the 1.2800 mark. Any subsequent move up is more likely to run out of steam near the 50% Fibo. level., around the 50% Fibo. level, around the 1.2825-1.2830 region, which should act as a pivotal point. Sustained strength beyond could trigger a near-term short-covering move. 

GBP/USD daily chart

Key levels to watch