GBP/USD refreshes 7-week lows sub-1.27 as Europe gets underway

After a brief recovery stint seen in the late-Asian trades, the bears fought back control and knocked-off the GBP/USD pair back below 1.27 handle, now flirting with fresh seven-week troughs struck at 1.2685.

GBP/USD: Sell the rallies post-UK election?

The spot is heavily dumped by the European traders in early trading, as they digest the UK election results, after the UK PM May’s Conservatives managed to gain a minor-win.  

Investors assess the news of a coalition government to be formed and its implications on the Brexit deal with the EU. It widely believed that with Conservatives overthrown in the UK election, ‘Hard Brexit’ is out of the window, which could pave the way for a big rally in the pound against its American counterpart.

However, presently, it seems that ‘Sell the fact’ trading has struck markets, with cable down over 1%, as odds of a Hung parliament was already discounted by most traders. All eyes now remain on the British PM May’s speech due at 0900 GMT, for fresh take on the new political arrangement in the UK and hence, on the Brexit deal.

Also, of note for the spot remains the UK industrial and manufacturing output data due on the cards in the European session, followed by goods trade balance. Meanwhile, the US President Trump’s speech will be also closely eyed after yesterday’s ex-FBI director Comey’s open testimony.

GBP/USD Levels to consider            

Haresh Menghani, Analyst at FXStreet noted: “With short-term indicators gradually moving towards negative territory, a decisive break below the 1.2700 handle would confirm a bearish break-down and accelerate the slide towards 100-day SMA support near 1.2620 region ahead of 50% Fibonacci retracement level support near 1.2580-75 area.”

“On the flip side, recovery attempts beyond the 1.2800 handle might now confront fresh supply near 1.2825-30 region, marking 23.6% Fibonacci retracement level. Any further up-move should now be capped at 1.2900 handle and only a decisive move back above the said hurdle would negate any near-term bearish bias for the major,” Haresh added.