GBP/USD spikes and retreats, back around mid-1.2700s

   •  Renewed USD selling bias helped regain positive traction and recover yesterday’s losses.
   •  Bullish traders seemed rather unaffected by DUP Wilson’s comments on Irish backstop.
   •  Further gains remain capped ahead of parliament debate on UK PM May’s Brexit debate.

The GBP/USD pair regained positive traction on Wednesday and recovered a major part of the previous session's retracement slide from one-week tops. 

Having found decent support near the 1.2700 handle, the positive tone around the British Pound picked up the pace during the early European session and was being supported by some renewed US Dollar selling bias. Despite a follow-through pickup in the US Treasury bond yields, the USD bulls held on the defensive and turned out to be one of the key factors driving the pair higher.

The strong intraday up-move seemed rather unaffected by DUP member Sammy Wilson's comments, saying that proposals on Irish backstop don't go far enough and are fairly meaningless. The comments further raised scepticism over the UK PM Theresa May's ability to get her Brexit deal through the parliament, though did little to prompt any fresh selling around the British Pound. 

The pair touched a session high level of 1.2777, though lacked any strong follow-through and quickly retreated around 25-30 pips ahead of the Brexit debate, starting today. Adding to this, nervousness ahead of a meaningful vote, scheduled to take place at 7 pm next Tuesday, January 15, might further collaborate towards keeping a lid on any runaway rally for the major.

In the meantime, comments by the BoE Governor Mark Carney, during an online question and answer session, followed by the latest FOMC meeting minutes might influence the price dynamics and produce some meaningful trading opportunities during the US trading session on Wednesday.

Technical levels to watch