GBP/USD extends strong intraday recovery, climbs further beyond 1.2800 handle post-UK PMI
| • ECJ hints that the UK can revoke Article 50 unilaterally and prompts some short-covering move.
• The British Pound gets an additional boost from better than expected UK manufacturing PMI.
• A sharp fall in the US bond yields weigh on the already weaker USD and remains supportive.
The GBP/USD pair broke out of its Asian session consolidation phase and surged through the 1.2800 handle in the last hour.
The latest leg of a sudden pickup over the past couple of hours or so followed the publication of an opinion by the General Advocate for the European Court of Justice, saying that the UK could unilaterally revoke Article 50.
The opinion raised hopes of a possible no Brexit option, though unlikely, and prompted some aggressive short-covering move, especially against the backdrop of overnight bullish resilience near the 1.2700 handle.
The British Pound got an additional boost from today's stronger than expected UK construction PMI, coming in at 53.4 for Nov. as against 52.5 expected and 53.2 seen in October.
This coupled with the prevalent US Dollar selling bias, triggered by the US-China trade truce and further aggravated by a sharp decline in the US Treasury bond yields, remained supportive of the strong positive momentum.
It, however, remains to be seen if the pair is able to build on the recovery move or the up-move once again meets with some fresh supply at higher levels amid growing concerns that the UK PM Theresa May could face a no-confidence vote if parliament rejects the Brexit deal.
Technical levels to watch
Immediate resistance is pegged near the 1.2830-35 region and is followed by the 1.2850 supply zone, above which the pair is likely to aim towards reclaiming the 1.2900 handle. On the flip side, any meaningful retracement now seems to find some support near the 1.2740 region, which if broken might drag the pair back towards challenging the 1.2700 handle.
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