• GBP/USD corrects sharply from three-month tops amid resurgent USD demand.
• A slight deterioration in the global risk sentiment revived demand for the USD.
• The pair retreated around 140 pips from intraday swing highs, near 1.2755 area.

The GBP/USD pair dived to fresh daily lows, around the 1.2620-15 region in the last hour, albeit quickly recovered few pips thereafter.

The pair witnessed a dramatic intraday turnaround from the highest level since March 12 and the pullback was exclusively led by a strong pickup in the US dollar demand. As investors digested the recent optimism about a sharp V-shaped recovery for the global economy, a slight deterioration in the global risk sentiment helped revive demand for the safe-haven greenback.

This comes amid the increasing risk of a no-deal Brexit, which took its toll on the British pound and prompted some aggressive long-unwinding trade around the GBP/USD pair. The sharp intraday fall prolonged through the early European session and has now dragged the pair to back closer to the 1.2600 round-figure mark, around 140 pips off the daily swing high level of 1.2755.

It will now be interesting to see if the pair is able to attract any dip-buying at lower levels or the current pullback marks the end of the recent bullish momentum. In the absence of any major market-moving economic releases, either from the UK or the US, the broader risk sentiment might continue to influence the USD price dynamics and provide some impetus to the GBP/USD pair.

Apart from this, a scheduled speech by the Bank of England Deputy Governor Jon Cunliffe might also produce some short-term trading opportunities. The key focus, however, will be on the outcome of a two-day FOMC meeting, starting this Tuesday, which will play a key role in driving the USD in the near-term and help determine the GBP/USD pair's next leg of a directional move.

Technical levels to watch