• Receding fears of no-deal Brexit continues to underpin the British Pound.
  • Upbeat UK data provided an additional boost and remained supportive.

After Friday's modest pullback and a subsequent dip at the start of a new trading week, the GBP/USD pair managed to regain strong positive traction and rallied to fresh multi-week tops following the release of stronger-than-expected UK macro releases. Data released on Monday showed that the UK economy expanded by 0.3% on a monthly basis in July - though was flat for the three months to July - and bettered market expectations. Adding to this, the UK industrial and manufacturing producing also surpassed consensus estimates.

UK macro data adds to Brexit optimism

The data added to the recent optimism over a softer Brexit and provided a strong boost to the British Pound, which coupled with some renewed US Dollar weakness, lifted the pair to an intraday high level of 1.2385 - the highest level since July 26. On the UK political front, the lawmakers voted to hinder the PM Boris Johnson's bid for an early election. The outcome was on expected lines and hence, did little to provide any meaningful impetus to the Sterling.
 
Meanwhile, Johnson’s spokesperson James Slack has confirmed the British Parliament’s prorogation for five-weeks to October 14 and hence, Tuesday's key focus will be on the UK monthly employment details. The headline unemployment rate during the three months to July is expected to hold steady at 3.9% and the number of people claiming unemployment-related benefits is expected to come in at 28K for July. The key focus, however, will be on wage growth data, with average earnings excluding bonus expected to tick lower to 3.8% (3Mo/Yr) from 3.9% previous.
 
In absence of any major market-moving economic releases from the US, the UK economic data might act as an exclusive driver of the broader sentiment surrounding the British Pound and play a key role in producing some meaningful trading opportunities on Tuesday.

Short-term technical outlook

Given that the pair has already broken through a near two-month-old descending trend-line resistance and has also found acceptance above 50-day SMA, the set-up remains tilted in favour of bullish traders. Hence, a follow-through move beyond the 1.2400 round figure mark, towards testing the next major hurdle near the 1.2435-40 region, now looks a distinct possibility.
 
On the flip side, any meaningful pullback now seems to find immediate support near the 1.2300 handle, which is closely followed by support near the 1.2270 region and the mentioned trend-line resistance breakpoint - around the 1.2230-20 region. Failure to defend the mentioned support might prompt some technical selling and accelerate the slide further towards the 1.2160-50 horizontal zone ahead of the 1.2120 region.

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