GBP/USD spikes to fresh session tops, beyond 1.2500 mark

• GBP/USD quickly reversed the European session dip to the 1.2460 region.
• The strong intraday bounce seemed unaffected by resurgent USD demand.
• Concerns about rising COVID-19 cases might keep a lid on additional gains.

The GBP/USD pair rallied around 60-65 pips from the European session lows and refreshed daily tops, around the 1.2520-25 region in the last hour.

Having failed to find acceptance above the key 1.2500 psychological mark, the pair witnessed some intraday pullback during the first half of trading action on Tuesday. The early downtick was sponsored by a goodish pickup in the US dollar demand amid a slight deterioration in the global risk sentiment.

Despite the incoming positive economic data, investors remain concerned that the continuous rise in the number of new coronavirus cases could trigger renewed lockdown measures. This, in turn, dampened prospects for a V-shaped global economic recovery and led to a modest pullback in the equity markets.

This coupled with persistent Brexit-related uncertainties further took its toll on the British pound. The GBP/USD pair, however, showed some resilience at lower levels, instead witnessed a dramatic turnaround and took along some intraday trading stops placed near the 1.2500 round-figure mark.

Meanwhile, the uptick lacked any obvious fundamental catalyst and could be solely attributed to some intraday short-covering move. As the UK and EU negotiating teams set to resume post-Brexit talks, investors seemed inclined to lighten their bearish bets in anticipation of any positive development.

Hence, it will be prudent to wait for some strong follow-through buying before positioning for any further near-term appreciating move. A sustained move beyond last week’s swing high, around the 1.2530 level, might be seen as a key trigger for bulls and set the stage for a move towards the 1.2600 mark.

Technical levels to watch