GBP/USD sits near multi-day tops, around mid-1.2200s

The GBP/USD pair maintained its strong bid tone through the early part of Tuesday's trading session and was last seen trading near multi-day tops, around mid-1.2200s.

The pair built on the previous day's strong intraday short-covering move of over 150 pips from seven-week lows and gained traction for the second consecutive session on Tuesday. The positive momentum was fueled by some follow-through selling around the US dollar, which remained on the defensive in the wake of the prevalent risk-on mood.

The global risk sentiment remained well supported by the recent optimism over the easing of lockdown restrictions globally and got an additional boost from encouraging data on coronavirus vaccine trial. The US drugmaker Moderna on Monday reported positive results from a Phase 1 clinical trial for its coronavirus vaccine.

The intraday buying interest picked up pace during the early European session, following the release of mixed UK monthly employment details. According to the data released this Tuesday, the UK unemployment rate unexpectedly ticked lower to 3.9%, which largely negated a larger-than-anticipated rise in the number of people claiming unemployment-related benefits.

Meanwhile, fears about the second wave of coronavirus infections and worsening US-China relations helped limit deeper USD losses. This coupled with growing expectations about negative BoE interest rates and the lack of progress in Brexit negotiations might keep a lid on any runaway rally for the British pound, at least for now.

Hence, any subsequent positive move, back towards the double-top neckline support breakpoint near the 1.2290-1.2300 region, might still be seen as a selling opportunity. This makes it prudent to wait for a sustained strength above the mentioned support-turned-resistance before positioning for any further near-term appreciating move.

Moving ahead, market participants now look forward to the release of the US housing market data – Building Permits and Housing Starts – for some impetus. This will be followed by the Fed Chair Jerome Powell and the US Treasury Secretary Steven Mnuchin's congressional testimony, which might produce some meaningful trading opportunities.

Technical levels to watch