GBP/USD analysis: Recent corrective bounce runs out of the steam near mid-1.2700s

A combination of supporting factors initially helped the GBP/USD pair to build on its recent recovery move from multi-month lows and climb to over one-week tops. The British Pound witnessed a follow-through short-covering bounce amid absent negative Brexit or UK political headlines and got a minor boost following the release of better-than-expected UK services PMI, which climbed to 51.0 in May as compared to an uptick to 50.6 expected from 50.4 in the previous month. The positive momentum accelerated further in the wake of persistent US Dollar selling bias and the latest disappointment from the US ADP report, showing that the private sector employers added only 27K new jobs in May.

However, given the fact that Boris Johnson is seen as the favourite to be the next British PM, growing fears of a no-deal Brexit held investors from placing any aggressive bids and kept a lid on any strong follow-through. The pair started retreating from an intraday high level of 1.2744 and was further weighed down by a goodish USD rebound in reaction to upbeat US ISM non-manufacturing PMI, coming in at 56.9 for May as compared to 55.5 expected and previous. The pair retreated around 65-pips intraday and settled near the lower end of its daily trading range, snapping three consecutive days of winning streak. 

The pair held on the defensive through the Asian session on Thursday as market participants now look forward to the BoE Governor Mark Carney's scheduled speech for some fresh impetus. Apart from this, there aren't any major market-moving economic releases due either from the UK or the US and hence, the USD price dynamics might act as a key determinant for the pair's momentum ahead of Friday's important release of the closely watched US monthly jobs report - popularly known as NFP.

From a technical perspective, the overnight rejection slide from mid-1.2700s and the pair's inability to sustain above 23.6% Fibonacci retracement level of the 1.3177-1.2559 recent slide clearly suggests that the near-term bearish pressure might still be far from over. Some follow-through weakness below the 1.2655-50 region will reinforce the outlook and turn the pair vulnerable to slide back below the 1.2600 handle and retest last week's swing low support near the 1.2560 region. 

On the flip side, any meaningful up-move beyond the 1.2700 handle might continue to confront fresh supply near the 1.2745-50 region, above which a bout of short-covering could lift the pair further towards 38.2% Fibo. retracement level, around the 1.2800 mark. The mentioned handle also coincides with a previous strong horizontal support break point and should now cap any further up-move.