GBP/USD extends recovery momentum further beyond 1.2600 handle

After an initial dip to session low near 1.2565 region, the GBP/USD pair reversed sharply and jumped to a fresh session peak, snapping four days of losing streak.

Currently trading around 1.2640 region, the pair was seen building on to its momentum back above 1.2600 handle amid broad based US Dollar retracement. In absence of any fresh economic releases, the current pull-back from session low could be attributed to short-covering once the pair sustained its recovery back above 1.2600 handle.

Moreover, investors seemed to readjust their positions ahead of this week's central bank monetary policy decisions, FOMC on Wednesday and BOE on Thursday, which would determine the pair's next leg of directional move. 

In the meantime, traders will look forward to Tuesday's Chinese macro data and UK economic docket featuring the release of inflation data for the month of November for short-term trading opportunities.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, notes, "Technically, the pair is stuck around the 50% retracement of its latest daily advance at 1.2575, and in the 4 hours chart, unable to advance beyond a bearish 20 SMA, whilst technical indicator have turned modestly lower within negative territory, supporting some additional slides for this Monday, particularly on a break below 1.2550, the immediate short term support. Below it, 1.2500 is the next bearish target, en route to 1.2470, a daily ascendant trend line coming from December low."

"The upside remains capped by selling interest in the 1.2610/20 region, with gains beyond 1.2630, the 38.2% retracement of the mentioned advance required to revert the intraday negative tone and see the pair advancing up to 1.2650/70."