GBP/USD rallies to 1.2800 neighborhood ahead of BoE’s Brexit analysis, Carney’s speech

   “¢   Lack of negative Brexit headlines prompts some aggressive short-covering move.
   “¢   BoE’s FSR/Brexit analysis/Carney’s speech expected to infuse a fresh bout of volatility.

The GBP/USD pair caught some aggressive bids in the last hour, with bulls now aiming for a move further beyond the 1.2800 handle.

Having shown resilience near the 1.2725 region – monthly lows support, the pair staged a solid rebound and has now recovered a major part of the previous session’s downfall to near two-week lows.  

The latest leg of a sudden upsurge over the past hour or so lacked any obvious catalyst and could be solely attributed to some short-covering move amid absent negative Brexit headlines.

Moreover, traders also seemed inclined to lighten their bets ahead of today’s release of Bank of England’s (BoE) financial stability report (FSR) and stress tests result at 1630 GMT.  

The central bank will also publish its analysis on the EU withdrawal agreement and the release will be followed by BoE Governor Mark Carney’s press conference at 1645 GMT.  

The BoE assessment regarding the UK economy’s ability to weather a hard Brexit is expected to infuse a fresh bout of volatility across the GBP pairs and seemed to be the only factor prompting some short-covering.

Hence, it would be prudent to wait for a strong follow-through buying interest before confirming that the pair might have already bottomed out in the near-term and is set to build on the ongoing recovery momentum.

Technical levels to watch

Any subsequent up-move beyond the 1.2800 handle is likely to confront immediate resistance near the 1.2825-30 region, above which the pair is likely to aim towards reclaiming the 1.2900 round figure mark.

On the flip side, weakness back below the 1.2765-60 region might continue to find some support near the 1.2725 region, which if broken might turn the pair vulnerable to break through the 1.2700 handle.