GBP/USD dives to over one-week lows, below mid-1.3200s
- GBP/USD added to its steep intraday decline and plunged to over one-week lows.
- New coronavirus strains led to fresh lockdown in the UK and weighed on the GBP.
- Weaker risk tone benefitted the safe-haven USD and contributed to the selling bias.
The GBP/USD pair added to its heavy intraday losses and tumbled to over one-week lows, further below mid-1.3200s during the first half of the European session.
The pair opened with a bearish gap on the first day of a new trading week in reaction to the imposition of tighter restrictions in the UK to stem a fast-spreading new coronavirus strain. This comes on the back of a deadlock in the post-Brexit trade negotiations and weighed heavily on the British pound.
Meanwhile, fresh coronavirus jitters overshadowed the optimism over a deal on a long-awaited $900 billion US coronavirus aid package and an emergency use approval for Moderna's COVID-19 vaccine. This, in turn, took its toll on the global risk sentiment and triggered a sharp pullback in the equity markets.
The anti-risk flow provided a strong boost to the US dollar's relative safe-haven status and further contributed to the GBP/USD pair's steep intraday decline. The pair has now retreated nearly 400 pips from over two-and-half-year tops, around the 1.3624 region touched last Thursday and seems vulnerable to slide further.
That said, extremely oversold RSI on intraday charts warrant some caution for aggressive bearish traders amid absent relevant market-moving economic releases, either from the UK or the US. Hence, the key focus will remain on developments surrounding the coronavirus saga and the incoming Brexit-related headlines.
Technical levels to watch