GBP/USD off lows, but remains below 1.29 handle

Having failed to sustain early gains beyond the 1.2900 handle, the GBP/USD pair retreated sharply closer to mid-1.2800s before bouncing off lows to currently trade in neutral territory around 1.2875 region. 

The pair came under some fresh selling pressure during early European session amid a modest US Dollar uptick. Adding to this, the British Pound was also being weighed down by last week's UK data-disappointment, which now seems to favor a dovish BoE stance. 

The pair, however, quickly recovered from lower levels as investors seemed reluctant to initiate any fresh bearish positions ahead of this week's important macro data from the US and the UK, and the Fed Chair Janet Yellen's testimony. 

Against the backdrop of Friday's stronger-than-expected headline NFP print, a pick in the US inflationary pressure would reinforce expectations for a tighter Fed monetary policy stance through 2017 and could force the pair to extend its near-term corrective slide further in the near-term. 

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Alternatively, weaker inflation figures would fuel concerns over weaker wage growth led sluggish inflation and impact the Federal Reserve's path of monetary policy tightening, which would eventually place some fresh pressure on the greenback and help the pair to resume with its prior appreciating move. 

Apart from the US macro data, the release of UK monthly jobs data would now be looked upon for some immediate respite for the GBP bulls and also play a key role in determining the next leg of directional move for the major.

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Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet writes: "The negative sentiment persists, with the pair now poised to extend its decline, as its pressuring the 38.2% retracement of its latest bullish run, at 1.2860, the immediate support. Technical indicators in the 4 hours chart have gained bearish momentum, whilst a bearish 20 SMA converges now with the 23.6% retracement of the same rally at 1.2925, capping the upside."

"Below the mentioned Fibonacci support, the pair has room to extend its decline towards the 1.2800/10 region, whilst further declines will target 1.2770 in the near term. To the upside, the mentioned 1.2925 level should attract sellers in the unlikely case of a recovery up to it" she added.