GBPUSD remains weak, extending losses for the fourth consecutive day on Wednesday. Risk sentiment looks mixed and unsustainable, supporting the safe-haven dollar demand. Apart from USD buying, dismal UK Construction PMI data added to the negative pressure surrounding GBPUSD. In recent trade, the pair dipped below the 50-DMA and dipped to fresh local lows around 1.2360.
The UK Construction PMI plunged to 8.2 in April and missed consensus estimates of 21.7 and 39.3 previously. As such, construction activity in the UK dipped to an all-time low last month amid the fallout from the coronavirus pandemic and business shutdowns.
Apart from local bearish drivers, the cable feels the pressure from the fact that the country is struggling to gradually reopen its economy. Also, the pound’s appeal is getting lower due to repositioning ahead of Breхit talks scheduled for next week. If the UK crashes out of the EU without a deal by the end of this year, it will be even more difficult for the economy to stage a recovery from the coronavirus crisis.
Considering this risk will persist in the days to come, GBPUSD may suffer further losses in the near term and dip to fresh lows below 1.23. On the downside, an important support level arrives at 1.2250 as a break under this figure could send the prices to 1.2150 and even lower.
On the other hand, should dollar demand wane, and risk sentiment improve any time soon, there may be some room for a rebound in the GBPUSD pair. In this case, the pound will first need to overcome the 50-daily moving average that turned into resistance during the recent trading. Then, the prices may target 1.2450 and 1.2480. However, it looks like that at this stage, the path of least resistance remains to the downside.
The immediate risk factor for the pair and risky assets in general is the upcoming US ADP employment report. If the data disappoint, the selling pressure surrounding the cable may intensify and send the pair to fresh local lows.