GBP/USD turns sharply lower, drops to 1.2250 ahead of UK PMI

The GBP/USD pair ran through fresh offers near 1.2300 handle and has now drifted in negative territory ahead of UK manufacturing PMI.

Currently trading around 1.2250 region, testing session low, a fresh wave of greenback strength, primarily led by intense selling pressure around the EUR/USD major, has been the key factor for the pair's rejection near 1.2300 handle. 

Further downslide, however, might be supported amid reluctance to initiate fresh short positions ahead of UK manufacturing PMI print, due in a short while from now. The gauge is expected show a slight slowdown in manufacturing activity during December and come-in at 53.0 as compared to 53.4 recorded in November. 

Later during NA session, the US ISM manufacturing PMI for December is due for release and would be looked upon for reinforcement of stronger US economic growth. Prospects of faster economic growth in the US would eventually influence investors’ expectations for further Fed rate-hike actions in 2017 and provide fresh impetus for the pair's next leg of directional move. 

Technical levels to watch

From current levels, sustained weakness below 1.2250 support is likely to accelerate the slide back towards 1.2225-20 horizontal support, which if broken might increase the pair's vulnerability to break below 1.2200 handle and head towards testing its next major support near 1.2130-25 region.

On the upside, 1.2300 handle now becomes immediate resistance above which the recovery could get extended towards 1.2335-40 resistance. A convincing move above 1.2335-40 resistance area might now trigger a short-covering rally and assist the pair back towards reclaiming 1.2400 handle, en-route 50-day SMA resistance near 1.2425 region.