The Sterling started the week on a firm note so far, letting GBP/USD play around the upper bound of the range 1.2800. This also indicated that GBP/USD showed a large rebound after the erosion happened on Friday which dropped to 1.2775, it’s the lowest level since April 25 after the UK election polls showed Conservatives are losing ground.
Currently trading around 1.2839 region, the pair progressively stepped higher through the European trading session in spite of the weekend polls exposed narrowing lead for May’s Conservative party lead. It would be interesting to know and see if the pair can build on the recovery move or can run through some fresh offers at higher levels among renewed concerns over a possible “hard Brexit” scenario and with the UK election less than two weeks away from now.
The continuing recovery move lacked any fundamental motivators and could be only accredited to short-covering on the back of a modest US Dollar retracement low volatility and thin liquidity conditions in the wake of a bank holiday in the UK and the US.
Close on Friday (1.2805) was well below the support offered by the trend line leaning upwards from the March low and April low. The breach of the mounting trend line signals the 11-week rally has ended.
In the meantime, spot stays correcting lower after failing to extend the rally further north of the 1.3000/50 band, prompting market participants to think that a top could be in place for the time being.
An almost empty UK docket this week (manufacturing PMI is due on Friday) should leave the attention to releases across the pond, while developments from the domestic political scenario are also poised to drive the sentiment around GBP ahead of the general elections on June 8.
GBP/USD Technical Level to Consider
Any further up-move beyond mid-1.2800s might challenge resistance near 1.2880 horizontal level, above which the momentum could get stretched towards 1.2900-1.2910 strong support break-point, now turned important resistance.
As of writing, the GBD/USD is gaining 0.28%
at 1.2835 and a breakout of 1.2928 (20-day sma) would aim for 1.2949 (high May 26) and finally 1.3013 (high May 25). On the other hand, the immediate support lines up at 1.2772 (low May 26) followed by 1.2758 (low Apr.21) and then 1.2696 (55-day sma).
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