“¢ A modest USD retracement triggers the initial leg of rebound.
“¢ Oversold condition prompts aggressive short-covering move.
“¢ Need to wait for a confirmation that a near-term bottom is in place.
The GBP/USD pair recovered around 80-pips from session lows and has now pared a major part of its early steep decline to 6-month lows.
The pair managed to find decent support near the 1.3200 handle, with a modest US Dollar retracement from the 95.00 neighborhood, or fresh yearly tops, prompting some short-covering move amid near-term oversold conditions.
Meanwhile, possibilities of some short-term trading stops being triggered, on a sustained move back above mid-1.3200s, could also be one of the factors behind the latest leg of sharp uptick over the past hour or so.
It would now be interesting to see if the pair is able to build on the momentum and jump back above the 1.3300 handle amid uncetainty surrounding impending Brexit talks.
From a technical perspective, the pair is rebounding from a support marked by a short-term descending trend-channel formation on short-term charts. Traders, however, are likely to wait for a strong follow-through buying before concluding that the pair might have bottomed out in the near-term.
Moving ahead, the release of Conference Board’s US consumer confidence index, the only highlight from today’s US economic docket, would now be looked upon to grab some short-term trading opportunities.
Technical levels to watch
Any subsequent up-move beyond the 1.3300 handle is likely to confront fresh supply near the 1.3335-40 region and is followed by the trend-channel resistance, currently near the 1.3365-70 zone. On the flip side, 1.3250 level now seems to protect the immediate downside, which if broken might turn the pair vulnerable to head back towards retesting the 1.3200 support area.
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