GBP/USD bounces off 2-month lows, still deep in the red near mid-1.2700s

Haresh Menghani FXStreet

• Brexit uncertainties continue to dent sentiment surrounding the British Pound.
• Resurgent USD demand further collaborates towards aggravating the selling pressure.
• Traders now seemed to lighten their bearish bets ahead of BoE’s Super Thursday.

The GBP/USD pair remained heavily offered through the early North-American session, albeit quickly recovered around 30-pips from over two-month lows touched in the past hour.

Against the backdrop of persistent Brexit uncertainties, the pair kept losing ground for the fourth trading session in the previous five and was being weighed down by a goodish pickup in the USD demand. In fact, the key US Dollar Index rallied to 2-1/2 month tops and was seen as one of the key factors behind the pair's sharp retracement from an intraday high level of 1.2813.

The downfall accelerated further after the UK Chancellor of the Exchequer Philip Hammond said that a no-deal Brexit would be a shock to the economy and would require fiscal stimulus. The pair tumbled to the 1.2730 region, the lowest since August 20, albeit seems to found some support at lower levels.

The rebound lacked any fundamental catalyst in terms of any economic data or Brexit related news/developments and could be solely attributed to some short-covering, especially after the recent slump and ahead of this week's key event risk - BoE's Super Thursday.

The pair is now trying to stabilize just above mid-1.2700s as market participants now look forward to the release of Conference Board's consumer confidence index, the key highlight from today's relatively thin US economic docket, in order to grab some short-term trading opportunities.

Technical levels to watch

A follow-through selling has the potential to continue dragging the pair further towards the 1.2700 handle en-route YTD lows support around the 1.2665-60 region. On the flip side, the 1.2775 level, followed by the 1.2800 handle might now act as immediate resistance levels, above which a bout of short-covering could lift the pair further towards the 1.2840-50 supply zone.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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