Although the GBP/USD pair fell towards the 1.27 handle in the European session, with the help of the dismal data from the U.S., it recovered to mid-1.27s in the first half of the NA session. However, the pair couldn't preserve its bullish momentum and is now virtually flat on the day at 1.2720.
Despite the initial reaction to the data, the overall market volatility remains very low on the first trading day of the week. Even the fresh developments from the U.K. couldn't help the pair find a short-term direction, and the pair stayed in its 50-pip daily trading range. After negotiating for two weeks, the Northern Irish Democratic Unionist Party finally reached an agreement with British Prime Minister's Conservative Party on Monday. Despite the agreement, some experts think that the Brexit process will be challenging amid May's thin majority.
On Tuesday, the BoE will publish its Financial Stability Report, and Governor Mark Carney will give his remarks on the report. With last week's hawkish comments from several MPC's, there is a possibility that the voting for a rate hike in the next BoE meeting could be a tie, forcing Carney to make the final decision. In that regard, tomorrow's speech will be important to see where Carney stands.
Technical outlook
The RSI on the daily graph is southbound towards the 30 handle, suggesting that the pair is likely to continue to fall in the short-term. With a daily close below 1.2700 (psychological level), the pair could aim for 1.2665 (100-DMA) and 1.2580 (Fib. 50% retracement of mid-March - mid-May rise). On the upside, resistances could be seen at 1.2760 (20-DMA), 1.2855 (50-DMA) and 1.2900 (psychological level).
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