The GBP/USD pair dropped to its lowest level in more than a month at 1.2850 in the early NA session as the pressure on the pair increased after the greenback gathered momentum on stronger-than-expected retail sales data from the U.S. As of writing, the pair was trading at 1.2860, losing 0.8% on the day.

Ahead of the U.S. data releases, the pair was already under pressure as the cable caught fresh offers after the inflation data from the U.K. failed to meet the market estimates, dampening the expectations of a BoE rate hike before the end of the year. According to the data, the CPI on a monthly basis in July contracted by 0.1% while it remained steady at 2.6% on a yearly basis.

• GBP: Looking beyond CPI inflation – Rabobank

Later in the day, the US Dollar Index rose above the 94 handle after the retail sales growth in the U.S. came in at 0.6%, beating the market consensus of 0.4%. Although the index started to fade the initial spike in the remainder of the session, pushing the DXY back to 93.70, the GBP/USD pair failed to make a recovery as investors don't seem ready to take their profits off the table yet.

• US: Retail sales for July 2017 were $478.9 billion, an increase of 0.6% from June

On Wednesday, employment data from the U.K. will be followed before the FOMC releases the minutes from the July meeting. Markets expect the 3-month unemployment to rate remain unchanged at 4.5% in July. A softer-than-expected data could weaken the cable further against its rivals.

Technical outlook

The RSI on the daily graph still hasn't moved below the 30 mark, suggesting that the pair could fall further before it shows oversold conditions. 1.2810 (Jul. 12 low) could be seen as the first technical support ahead of 1.2715 (Jun. 8 low), and 1.2640 (Jun. 12 low). On the upside, resistances align at 1.2920 (100-DMA), 1.2965 (50-DMA) and 1.3000 (psychological level).

• GBP: Reasons to worry? - BAML