GBP/USD: Bears regain control ahead of UK services PMI

• DXY corrects lower in Asia.
• ‘No Brexit deal’ still weighs.
• The UK services PMI on tap.

The GBP/USD witnessed a volatile session and emerged the biggest mover across the fx board on Monday, as a ‘No Brexit deal’ headline dominated markets. However, the losses remained capped amid hopes of a Brexit deal still alive and expected to be reached ahead of the EU Summit next week.

GBP/USD: 1.3500 still on sight?

 The spot fell to the lowest levels in three days to test the 10-DMA support of 1.3416, before staging a solid comeback towards 5-DMA placed at 1.3486. At the time of writing, Cable appears to consolidate the latest uptick near 1.3470 levels.

The overnight sharp reversal in the major gathered steam after the US dollar failed to sustain again near 93.30 levels against its main competitors and fell back to test the 93 handle, tracking the drop in the 10-year Treasury yields from 2.41% to 2.38%. Also, solid UK manufacturing and construction PMI reports also offered some support to the GBP.

However, further recovery could be limited amid looming Brexit uncertainty and the recent strength seen in the US dollar, in the wake of the US tax reform passage and monetary policy divergence. The Fed remains on track to hike rates later this month amid encouraging US macro news.  

Focus now shifts towards the UK services PMI report and US ISM services PMI for further momentum on the prices.

GBP/USD Technical Levels

According to Valeria Bednarik, Chief Analyst at FXStreet: “Technically, the 4 hours chart shows that the price has settled below a still bullish 20 SMA, also below the 23.6% retracement of its latest bullish run, having once again bottomed around the 38.2% retracement of the same rally at 1.3420. Technical indicators in the mentioned chart have turned south, with the Momentum within the negative territory, but the RSI around its mid-line, favoring a new leg lower on a break below the mentioned Fibonacci support at 1.3420. Support levels: 1.3420 1.3380 1.3340. Resistance levels: 1.3505 1.3550 1.3590.”