GBP/USD upside capped around 1.2300, risk-off prevails

The Sterling is navigating within a tight range vs. the greenback at the beginning of the week, with GBP/USD now testing the area of daily lows near 1.2280.

GBP/USD weaker amidst risk-off trade

Spot is reverting part of Friday’s gains in response to the risk aversion sentiment prevailing on Monday following concerns over North Korea’s launch of four ballistic missiles into the Sea of Japan.

GBP still remains under pressure, as uncertainty over Brexit negotiations has been rising after the House of Lords voted to amend the Brexit bill last week, which is now back to the House of Commons for deliberation.

In addition, UK’s fundamentals appear somewhat debilitated as of late, collaborating with the bearish sentiment around the British Pound.

Further weakness around GBP is also coming from the speculative community, where net shorts have increased to the highest level since mid-December during the week ended on February 28, according to the latest CFTTC report.

The prospects for extra pullbacks in spot have gathered pace lately following rising expectations of a Fed’s move at next week’s 2-day meeting. According to Thompson/Reuters’s Fedwatch, the probability of a rate hike this month is now at above 85%.

GBP/USD levels to consider

As of writing the pair is losing 0.19% at 1.2281 and a break below 1.2212 (low Mar.3) would aim for 1.2197 (low Dec.28 2016) and finally 1.2036 (low Jan.11). On the flip side, the initial up barrier aligns at 1.2308 (high Mar.2) followed by 1.2389 (55-day sma) and then 1.2412 (100-day sma).