The GBP/USD pair extended the Asian session recovery move and surged through the 1.2900 handle during early European session.
Today's recovery move, from closer to over one-month lows touched yesterday, was backed by some renewed US Dollar selling pressure led by growing US political uncertainty, especially after the US President Donald Trump's abrupt disbanding of manufacturing and strategic councils.
Meanwhile, possibilities of some stops being triggered on a move beyond the 1.2900 handle could have been a key factor behind the pair's knee-jerk spike of around 20-30 pips in the past hour.
Despite the prevailing bearish sentiment surrounding the greenback, the pair lacked any strong follow through buying interest beyond the 1.2900-10 region and continues to be weighed down by the latest dovish BoE monetary policy outlook. The pair has even failed to benefit from growing market conviction that the Fed might refrain from raising rates further in 2017, clearly suggest that the near-term corrective slide might still be far from over.
• GBP futures: bearish sentiment unchanged
Looking at the broader picture, the pair has been confined within a 50-60 pips broader trading range over the past three trading sessions and fresh buying interest seems to be emerging on every dip towards the 1.2850-40 region. Hence, it would be prudent to wait for a decisive break below the mentioned support area or a strong momentum beyond the 1.2900 before committing to the pair's next leg of directional move.
Today's economic docket lacks any major market moving economic releases from the UK, while from the US the only release of Prelim UoM Consumer Sentiment is unlikely to provide any fresh impetus. Hence, the focus would be on a scheduled speech by Dallas Fed President Robert Kaplan, due later during the early NY trading session.
Technical levels to watch
Momentum beyond the 1.2900 handle is likely to confront fresh supply near the 1.2930 region (50-day SMA), above which a bout of short-covering could lift the pair back towards reclaiming the key 1.30 psychological mark.
On the downside, weakness back below 1.2880 level could drag the pair back towards the 1.2850-40 strong support, which if broken would turn the pair vulnerable to extend its near-term corrective slide even below the 1.2800 handle towards its next support near 1.2775 area.
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