GBP/USD fails to preserve gains, calms down below mid-1.27s

Although the GBP/USD pair took advantage of the broad-based USD weakness and rose above the 1.28 handle on Monday, it failed to extend its rally in the second half of the day and erased its daily upside. As of writing, the pair was trading at 1.2735, losing 0.1% on a daily basis.

After the U.S. and China agreed to hold off on additional tariffs for the next 90 days, the greenback, which acted as a safe-haven during the times when trade-concerns weighed on the sentiment, started the week under pressure to allow the pair to gain traction. Additionally, the IHS Markit's Manufacturing PMI in the UK came in at 53.1 in November to beat the analysts' estimate of 51.8 and provided extra support to the sterling.

• UK manufacturing PMI hits 2-month highs at 53.1 in Nov, a big beat.

However, with political headlines from the UK hinting at the possibility of the Parliament voting down Prime Minister Theresa May's Brexit deal, investors refrained from making large bets and the pair lost its momentum. 

• One third of May’s MP Trade Envoys will not back Brexit plan – Sky.

On the other hand, the US Dollar Index rose toward the 97 mark in the NA session and forced the pair to fall back into the negative territory. Nevertheless, today's mixed manufacturing PMI data from the U.S. made it difficult for the index to stay in the green and helped the pair to limit its losses.

• US: Markit Manufacturing PMI falls to 55.3 vs 55.4 expected.
• US: ISM Manufacturing PMI rises to 59.3 vs 57.5 expected.

Technical levels to consider

1.2700 (daily low/Oct. 30 low) aligns as the first critical support for the pair ahead of 1.2640 (Jun. 12, 2017, low) and 1.2590 (Jun. 21, 2017, low). On the upside, resistances are located at 1.2820 (20-DMA/daily high), 1.2880 (Nov. 23 high) and 1.2930 (Nov. 22 high).