GBP/USD corrects from yearly tops, around mid-1.3500s

Having refreshed yearly tops near 1.3620 area, the GBP/USD pair turned lower and has now dropped to session lows in the 1.3540/50 region during early European session. 

The pair's retracement of around 80-pips lacked any fundamental catalyst and seems to have been solely led by some profit taking, especially after the pair's post-BoE sharp upsurge of over 450-pips in just two trading sessions. 

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Reviving Fed rate hike expectations, reinforced by rising US Treasury bond yields underpinned the US Dollar demand and seems to be only factor weighing on the major at the start of a new trading week. 

The downside, however, might remain cushioned by last week's hawkish BoE decision, with market participants now pricing-in a possible November rate hike. 

The pair's fall could also be attributed to some cross-driven weakness, with the EUR/GBP cross attempting a modest recovery from near two-month lows and moving back above the 0.8800 handle. 

Investors now look forward to a scheduled speech by the BOE Governor Mark Carney ahead of this week's key event risk - the keenly watched FOMC monetary policy decision. Also in focus would be the UK monthly retail sales data, which coupled with the UK PM Theresa May's Brexit speech on Friday would help determine the pair's next leg of directional move. 

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Technical levels to watch

A follow through weakness could get extended towards the key 1.35 psychological mark, below which the pair is likely to drift towards 1.3440-30 support area. On the upside, momentum back above the 1.3590-1.3600 region, leading to a subsequent strength beyond 1.3620 level, should pave way for continuation of the pair's up-move towards the 1.3700 handle.