The British Pound was shaken by the latest Brexit drama and tumbled across the board on Monday after the UK PM Theresa May called off a highly anticipated Brexit parliamentary vote. May admitted that the vote would have been lost by a wide margin and hence, she will now hold emergency talks with the EU to secure assurance that changes to the backstop would ensure it's not permanent. The latest development added to an element of chaos to an already uncertain situation and disappointing UK macro data, resulting in a 250-pips intraday selloff in the GBP/USD major.
The selling pressure, however, abated during the US trading session and the pair managed to find some buying interest near the key 1.25 psychological mark. The slow recovery extended through the Asian session on Tuesday, lifting the pair back closer to the 1.2600 handle ahead of the UK employment details. The key focus will be on average earnings data, which is anticipated to match previous month's reading of 3.0% (including bonus) and only a meaningful deviation might produce some meaningful trading opportunities.
From a technical perspective, highly oversold conditions on hourly charts turned out to be one of the key factors behind the pair’s overnight modest rebound and hence, run the risk of losing steam at higher levels. The 1.2600 handle now seems to act as an immediate strong resistance, above which a bout of short-covering could lift the pair further towards previous yearly lows, around the 1.2660-65 region. On the flip side, weakness back below mid-1.2500s might continue to find some support near the 1.2500 handle and is followed by a strong horizontal support near the 1.2470-65 region. A convincing breakthrough the mentioned supports should pave the way for an extension of the pair's strong near-term bearish trajectory.
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