After struggling to extend its recovery above the 1.27 handle, the GBP/USD came under a renewed selling pressure in the NA session and pushed lower toward its two-month low that was set a couple of days after the U.K. election at 1.2638. As of writing, the pair is trading at 1.2653, down 0.7% on the day.
Earlier in the European session, in his Mansion House speech, the Bank of England Governor Mark Carney argued that it wasn’t yet the time for a rate adjustment amid mixed signals on consumer spending and business investment and added that Brexit would be a big test for the economy. Following Carney’s comments, the cable sell-off weighed on the GBP/USD pair and pushed the EUR/GBP pair higher.
On the other hand, the greenback continues to be supported by the hawkish comments from FOMC members. In the early trading hours of the NA session, Boston Fed President Eric Rosengren said that low rates would make it tougher for the Fed to fight off future recessions. After reaching its session top at 97.34, the US Dollar Index is now at 97.28, up 0.05% on the day. Later in the session, Dallas Fed President Kaplan, who on Friday said that he needs to see more evidence of inflation recovering before making another policy move toward normalization, will cross the wires. A hawkish shift in his tone could provide an additional boost to the greenback.
At the moment, the pair is testing the 100-DMA support at 1.2650. A decisive break below this level could open the door to 1.2580 (Fib. 50% retracement of mid-March – mid-May rise) and 1.2480 (Fib. 61.8%). However, the RSI on the daily graph is inching closer to the oversold area, suggesting that a technical correction could be seen before the pair extends its bearish move. On the upside, the former support at 1.2690 (Fib. 38.2%) now aligns as the first technical resistance ahead of 1.2800 (psychological level/20-DMA) and 1.2870 (50-DMA).