GBP/USD sticks to goodish recovery gains, above 1.2600 handle
• Coveney’s positive Brexit comments triggered the initial leg of short-covering bounce.
• Upbeat UK earnings data provided an additional boost and remained supportive.
• Traders now look forward to the US PPI figures for some short-term impetus.
The GBP/USD pair held on to its goodish intraday recovery gains and now seems to have entered a bullish consolidation phase, above the 1.2600 handle.
Despite yesterday's brutal sell-off, led by the latest Brexit chaos, bulls managed to defend the key 1.2500 psychological mark, with a combination of supporting factors helping the pair to stage a solid rebound on Tuesday.
Positive comments by Irish Deputy Prime Minister Simon Coveney, saying that there is a potential for a new statement on the declaration from the European Union on the Irish backstop to help reassure the UK parliament triggered the initial leg of rebound.
The British Pound got an additional boost after the latest official figures showed that average weekly earnings, excluding bonuses, went up by 3.3% in the three months to October, marking the biggest rise since November 2008, and the number of people in work rose by 79,000 to a record high.
Despite a combination of supporting factors, and some renewed US Dollar selling bias, the up-move seemed to lack strong bullish conviction and remained capped amid persistent Brexit uncertainties. Hence, it would be prudent to wait for a strong follow-through up-move to see if the uptick is backed by some genuine buying or has been solely led by near-term short-covering.
Market participants now look forward to the US economic docket, highlighting the release of PPI figures for November, which might influence the USD and produce some short-term trading opportunities.
Technical levels to watch
Any subsequent up-move is likely to confront fresh supply near the 1.2655-60 region, above which the pair is likely to aim towards reclaiming the 1.2700 round figure mark. On the flip side, the 1.2580-75 region now seems to protect the immediate downside, which if broken might accelerate the fall towards the 1.2535 intermediate support en-route the 1.2500 round figure mark.