GBP/USD turns sharply lower, hits fresh session low

The GBP/USD pair ran through fresh offers near 1.2300 handle and has now drifted back into negative territory, reversing around 40-pips from session peak.

Currently trading around 1.2260-55 region, testing session lows, the pair once again failed to extend its recovery move to reclaim 1.2300 handle amid renewed greenback buying interest. In fact, the overall US Dollar Index has managed to recover early lost ground and has turned flat for the day, around 103.00 mark. 

Looking at the broader picture, any corrective dip in the greenback has turned out to be shallow and is being bought into, clearly suggesting that the Dollar up-trend remains intact as investors seemed convinced that Trump's fiscal stimulus measures would spur US economic growth. Adding to this, hawkish Fed outlook for 2017 might also continue to underpin the US currency and restrict any swift recovery for the pair. 

However, it is turning out to be crowded long US Dollar trade and hence, runs the risk of sharp corrective move in case of any bad news in-terms of the incoming US economic data. Hence, next week's NFP data would grab investors' attention and would be a key determinant for the pair's next leg of directional move.

In the meantime, trading activity is likely to remain subdued in absence of any major market releases on Wednesday. From UK, Mortgage Approvals for November is the only relevant data, while Pending Home Sales data from the US might provide some impetus during NY session. 

Technical levels to watch

A follow through retracement below 1.2250 level now seems to drag the pair back below multi-week lows support near 1.2240-30 area and accelerate the slide towards 1.2200 round figure mark. A convincing break below 1.2200 handle would turn the pair vulnerable to continue drifting lower in the near-term.

Meanwhile on the upside, 1.2300 handle remains immediate strong hurdle above which the pair is likely to head towards testing an important support break-point, now turned strong resistance near 1.2330-25 region. Momentum above this strong resistance is likely to trigger a short-covering rally towards 1.2400 round figure mark, which could further get extended towards 50-day SMA resistance near 1.2425 region.