GBP/USD Forecast: Sellers take action as 1.2560 support fails

GBP/USD dropped to its lowest level in over two months below 1.2530.
The pair needs to reclaim 1.2560 to shake off the bearish pressure.
Wall Street’s main indexes remain on track to open lower following long weekend.
GBP/USD came under renewed bearish pressure and touched its lowest level since June 13 below 1.2530 in the European morning on Tuesday. The pair’s near-term technical outlook suggests that sellers could continue to control the action as long as 1.2560 resistance stays intact.

Following Monday’s choppy action due to thin trading conditions, safe-haven flows started to dominate the financial markets early Tuesday. Major Asian equity indexes suffered large losses as investors reacted to weaker-than-expected Services PMI data from China. Confirming the souring market mood and pointing to a bearish opening in Wall Street following the Labor Day holiday, US stock index futures were last seen losing between 0.2% and 0.4%.
Meanwhile, mixed data from the UK failed to help Pound Sterling find a foothold. The British Retail Consortium reported that retail sales rose 4.1% on an annual basis in August, surpassing the three-month average of 3.6%. On a negative note, Barclays reported that annual growth in consumer spending on credit and debit cards slowed to 2.8% in August from 4.0% in July.

Pound Sterling price today
The table below shows the percentage change of Pound Sterling (GBP) against listed major currencies today. Pound Sterling was the weakest against the US Dollar.In the second half of the day, July Factory Orders data will be featured in the US economic calendar. Investors are unlikely to pay attention to this lagging data.

Action in US Treasury bond yields and the major US equity indices could impact the US Dollar’s valuation and drive GBP/USD’s action in the American session. A continuation of risk-aversion could continue to weigh on the pair.

GBP/USD Technical AnalysisGBP/USD declined sharply after breaking below 1.2560 (former support, mid-point of the descending regression channel). On the downside, 1.2500 (psychological level, lower limit of the descending channel) could be set as the next bearish target and a daily close below that level could open the door for an extended slide toward 1.2450 (static level from May).

In case GBP/USD manages to reclaim 1.2560 and stabilize above that level, sellers could be discouraged. In that scenario, 1.2600 (psychological level, static level) could be seen as the next recovery target before 1.2630 (upper limit of the descending channel, 50-period Simple Moving Average).