GBP/USD off lows, still in the red below 1.2500 handle
- A modest intraday USD pullback extended some support at lower levels.
- The UK political drama continues to weigh on the GBP and capped gains.
- The key focus remains on the Tory leadership contest results on Tuesday.
The GBP/USD pair quickly recovered around 30-35 pips from daily lows, albeit lacked any follow-through and remained below the key 1.2500 psychological mark.
After an initial uptick to levels beyond the 1.2500 handle, the pair met with some fresh supply and dropped to an intraday low level of 1.2456 in reaction to the UK Foreign Office Minister Sir Alan Duncan's resignation.
This coupled with the fact that some of the key Tory members - including the UK chancellor of the exchequers Phillip Hammond, stand ready to resign further collaborated to the pair's sharp intraday slide of around 60-pips.
The sentiment deteriorated further after NIESR think tank said that Brexit uncertainty could have already pushed the UK economy into recession and the country is expected to stagnate next year in case of an orderly no deal.
Meanwhile, the US Dollar failed to capitalize on its intraday positive move and eased a bit in the last hour, which turned out to be the only factor that helped the pair to stage a modest bounce from daily swing lows.
The pair, however, seems unlikely to make it back above the 1.2500 handle as investors might hold place any aggressive bets ahead of the outcome of the Tory leadership contest, expected to be announced on Tuesday.
Hence, it would be prudent to wait for a sustained move in either direction before traders start positioning for any meaningful intraday momentum amid absent relevant market moving economic releases.
Technical levels to watch