GBP/USD holds above 1.28, on the brink of biggest weekly drop since January

The GBP/USD pair fell its lowest level since April 25 at 1.2775 during the NA session and started to retrace its losses as investors started to cash in their profits ahead of the Memorial Day weekend. As of writing, the pair was trading at 1.2805, losing 130 pips, or 1%, on the day.

In addition to the recovery seen in the US Dollar Index on the back of solid data, the cable's broad-based weakness put further pressure on the pair. Other than the greenback, the GBP recorded heavy losses against the euro and the yen as well. On a weekly basis, the GBP/USD pair lost nearly 200 pips and is on its way to record its largest weekly fall since the first week of January while the EUR/GBP pair gained more than 100 pips and the GBP/JPY lost more than 200 pips. 

Rising concerns over the ability of UK Prime Minister May's Conservatives to win the election on June 8, which would jeopardize a smooth Brexit process, seems to be the main catalyst behind the GBP's collapse. "Labour continues to narrow the gap on the Conservatives with one YouGov poll putting them within five points of Theresa May's party," said The Telegraph in a recent article. 

• UK Election: Labour continues to close the gap against Conservatives 
• UK: YouGov/CEBR consumer confidence, weakest since weeks after Brexit vote

Technical levels to consider

With a weekly close below the 23.6% Fibo retracement of the March-May rise at 1.2820, the pair could aim for 1.2690 (Fibo 38.2%) and 1.2590 (100-DMA). On the upside, short-term resistances could be found at 1.2900 (psychological level), 1.2940 (20-DMA) and 1.3000 (psychological level/May 24 high).

• GBP/USD: bearish breakout exposes critical 1.2760/70 region