- A contested US election outcome boosted the USD and exerted heavy pressure on GBP/USD.
- Some signs of stability weighed on the safe-haven USD and extended some support to the pair.
- The uncertain US political situation might keep a lid on any meaningful positive up for the major.
The GBP/USD pair recovered around 80-90 pips from daily swing lows, albeit seemed struggling to build on the momentum further beyond the key 1.3000 psychological mark.
Having witnessed a dramatic intraday turnaround of over 200 pips from two-week tops, the pair managed to find decent support ahead of the 1.2900 mark amid a modest US dollar pullback from higher levels. The early results of the US election indicated a tighter than expected race for the White House and forced investors to adjust their portfolios, which, in turn, provided a strong boost to the greenback.
As the volatility subsided, some signs of initial stability in the financial market drove some haven flows away from the greenback and was seen as key factor lending support to the GBP/USD pair. However, the fact that vote counts will continue in key battleground states, along with Trump's intension to challenge the ongoing vote counts might continue to fuel uncertainty over the next few weeks.
This, in turn, should underpin the safe-haven USD and keep a lid on any strong gains for the GBP/USD pair. Hence, any subsequent move up is more likely to remain limited, rather runs the risk of fizzling out rather quickly, warranting some caution for aggressive bullish traders and positioning for any meaningful appreciating move.
In the meantime, investors might take cues from Wednesday's US economic docket, highlighting the release of the ADP report on private-sector employment and ISM Services PMI. The data is more likely to be overshadowed by US political developments.
Technical levels to watch
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