GBP/USD: bears in control looking to close below 1.3850

• GBP/USD has continued its liquidation of longs.
• GBP/USD weighed on strong dollar and soft UK data/concerning politics.

On the back of domestic political risks and the increased likelihood of higher US rates, GBP/USD has been trading below the 1.39 handle in a continuation of the liquidation of longs from above 1.4200 and is currently trading at 1.3868, down -0.69% on the day, having posted a daily high at 1.4002 and low at 1.3836.

PM May's Brexit policies a concern

Analysts at Scotiabank explained that sterling is trading a little softer overall with UK data showing weaker service sector output yesterday and only modest growth in retail spending (BRC sales rose 0.6% like for like in Y/Y terms) have not helped GBP sentiment but the real driver of weakness has been broader market volatility.

"Soft-ish data and ongoing focus on domestic political risks as PM May tries to steer her Brexit policies through parliament may drag on the GBP’s performance near-term," the analysts added.

GBP/USD levels

Technically, the pound is in the bearish territory while now below 1.3980 as being the Jan 30 low and 1.3900. 1.3850 is a key support level that bear will look to close below in the absence of any commitment from bulls at cheaper levels. The 200 4hr SMA at 1.37667 and the 1.3658 September peak are in focus.