Water-logged GBP/USD continuing to sink, 1.36 barely holding

• Sterling sagging into new lows as faith in the BoE falters amid souring economic data.
• UK Construction PMI could open up the GBP to further downside ahead of the FOMC Monetary Policy Meeting. 

The GBP/USD pair is trading flat through the Asia session, holding just above the 1.3600 handle ahead of the European market session.

GBPUSD: Remains Vulnerable, Extends Weakness

The Sterling's Manufacturing PMI broadly missed market estimates on Tuesday, further continuing the pair's decline and hitting into new four-month lows, having fallen for ten of the last eleven consecutive trading days. Wednesday brings the PMI Construction index for April at 08:30 GMT, which is expected to climb from 47.0 to 50.5. Economic indicators for the UK have softened extensively in the latter half of April, and the GBP has been suffering at the hands of markets that have soured on the Bank of England (BoE), which looks set to stand pat on their next rate decision this month, which had been projected as the central bank's first increase of 2018. With the UK's economy softening more than expected, the BoE will have to hold off on lifting interest rates, and the Sterling has tumbled as traders price in the reversal of policy expectation.

FOMC and ADP preview - Nomura

Wednesday also brings the US FOMC's Monetary Policy Statement at 18:00 GMT. While the FOMC is widely expected to hold steady on interest rates for this meeting, markets are broadly expecting another three rate hikes this year for the US, and traders will be looking for hawkish language from the FOMC on Wednesday's meeting.

GBP/USD analysis: decline paused, but not over yet

GBP/USD Levels to watch

The Sterling has begun to break technical indicators diving into bearish territory, and the trend shows little signs of easing up, and as FXStreet's Chief Analyst Valeria Bednarik noted, "the GBP/USD pair has now accumulated over 800 pips of straight losses ever since hitting 1.4375 mid-April, but the bearish trend remains firm in place according to technical readings, with no signs of downward exhaustion, despite extreme oversold readings. And while an upward correction is not out of the table, much of the upcoming move will depend on how the market reacts to Fed's statement. For the short-term, technical readings in the 4 hours chart maintain the risk skewed to the downside, as the 20 SMA maintains a sharp downward slope far above the current level, widening the distance with the 200 EMA which also gains downward traction, as technical indicators hover within oversold territory, reflecting the ongoing correction rather than confirming a bottom."

Support levels: 1.3590 1.3550 1.3500

Resistance levels: 1.3645 1.3685 1.3715