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  • GBP/USD finds sellers at 1.3080 and retreats to 1.3020 area.
  • The pound trims gains as risk appetite eases.
  • GBP/USD could still retreat to the mid-1.2800s -–UOB.

The pound sterling is pulling lower on the late North American session on Tuesday, trimming earlier gains after a sharp rally to 1.3080 highs. The pair has given away ground, returning to 1.3020 area as the USD ticks up.

The pound retreats as risk appetite eases

The cable has retreated from session highs, although it remains positive on the day, with a 0.8% rally to extend Monday’s rebound from 1.2855 low. The risk appetite seen on the European and early US sessions seems to be fading, with the US equity indexes coming down from session highs and the US dollar regaining lost ground.

With the Americans heading to the polls, the markets have shrugged off the risk aversion witnessed last week, anticipating a clear Democrat victory which would open the way for a large fiscal stimulus package and thus, weaken the USD on the mid-term.

On the other hand, the lack of news from the Brexit negotiations, which the clock ticking towards the December 31 deadline and the introduction of a one-month lockdown to curb  COVID-19 infections in the UK, seem to have been ignored by the investors, contributing to buoy the GBP.

GBP/USD could still retest the mid-1.2800s – UOB

On the technical domain, the FX analysis team at UOB expects the pound to remain under a mild downside pressure in the near-term and do not discard a retracement to 1.2845 area: “GBP is deemed to be under mild downward pressure and could gravitate towards the major support at 1.2845’. GBP subsequently plummeted to 1.2854 but the decline was short-lived. From here, there is no change in our view and we still see a chance for GBP to test the 1.2845 level. Only a break of 1.3030 (no change in ‘strong resistance’ level) would indicate that the current mild downward pressure has eased. Looking forward, the next support below 1.2845 is at 1.2800.”

Technical levels to watch