GBP/USD Price Analysis: 100-day SMA/38.2% Fibo. confluence holds the key for bulls

• The UK political crisis, dismal domestic data dragged GBP/USD to a nearly two-week low.
• The mixed technical set-up warrants some caution before placing aggressive bearish bets.

The GBP/USD pair continued losing ground through the mid-European session and dropped to a near two-week low, around the 1.3555 region in the last hour.

Against the backdrop of the UK political turmoil, dismal domestic data undermined the British pound and dragged the GBP/USD pair lower for the second successive day on Friday. This also marked the fifth day of a negative move in the previous six and seemed unaffected by moded US dollar weakness, weighed down by retreating US Treasury bond yields.

From a technical perspective, acceptance below the 23.6% Fibonacci retracement level of 1.3161-1.3749 move up was seen as a key trigger for bearish traders. The subsequent downfall might have already set the stage for an extension of the recent pullback from the vicinity of mid-1.3700s, or a two-month high touched last Thursday.

Meanwhile, technical indicators on the daily chart – though have been losing positive traction – are still holding in the bullish territory. Hence, any further downfall is more likely to find decent support near the 1.3540-1.3530 confluence. This comprises 100-day SMA and the 38.2% Fibo., which should now act as a pivotal point.

A convincing break below will suggest that the GBP/USD pair has topped out in the near term and dragged spot prices to the 1.3500 psychological mark. The downward trajectory could further get extended towards the 50% Fibo. level, around the 1.3455 region.

On the flip side, the 23.6% Fibo. level, around the 1.3610 region, now seems to act as immediate strong resistance. Any further move up might continue to meet with a fresh supply near the 1.3660 area, which if cleared decisively will suggest that the corrective slide has run its course. The GBP/USD could then reclaim the 1.3700 round-figure mark.

GBP/USD daily chart

Technical levels to watch