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  • Some aggressive USD unwinding trade assisted GBP/USD to gain strong traction on Tuesday.
  • The US political uncertainty forced the USD bulls to lighten their bets ahead of the elections.
  • Not so optimistic Brexit headlines kept a lid on any further gains, at least for the time being.

The GBP/USD pair maintained its strong bid tone through the mid-European session and was last seen hovering near three-day tops, around the key 1.3000 psychological mark.

The pair caught some fresh bids on Tuesday and has now recovered around 150 pips from over two-week low, around mid-1.2800s touched in the previous session. The British pound took a hit on the first day of a new trading week in reaction to the imposition of the second nationwide lockdown in the UK. However, reviving hopes for a last-minute Brexit deal helped ease the bearish pressure and limit any further losses.

On the other hand, the US dollar witnessed some aggressive long-unwinding trade and gave back some of its recent strong gains to one-month tops. The USD bulls opted to lighten their bets amid growing wariness about the actual outcome of the US presidential election. This, in turn, was seen as another factor fueling the GBP/USD pair’s strong intraday positive move, though the incoming Brexit headlines capped the upside.

According to Reuters, citing EU and UK sources familiar with talks, both sides have failed to agree on sharing access to fishing waters, level playing field and resolve differences over state aid. That said, the continuation of intensive Brexit talks was still seen as a sign that both sides are still pushing to seal a new partnership agreement.

Hence, the focus will remain on fresh Brexit developments, which will continue to play a key role in influencing the sentiment surrounding the sterling. Apart from this, some repositioning trade ahead of the key event risk in the US might also contribute to infuse some volatility and assist the GBP/USD traders to grab some short-term opportunities.

Technical levels to watch