GBP/USD retreats sharply from 2-1/2 week tops

   •  Fails to build on early up-move. 
   •  UK poised to increase its offer for EU divorce bill.
   •  US tax cut bill headlines to remain in focus. 

The GBP/USD pair trimmed some of its strong gains and retreated around 50-pips from 2-1/2 week highs touched earlier. 

News that the UK is preparing to increase its offer for the so-called EU divorce bill helped limit early losses, led by German coalition break down, and lifted the pair into positive territory for the fifth consecutive session. 

UK: Political drama to be most profound - BBH

The pair moved to fresh post-dovish BoE highs and touched an intraday high level of 1.3279 during the European session on Monday before quickly reverting back to the 1.3235-30 region. 

A modest US Dollar uptick, despite prevalent negative tone around the US Treasury bond yields, kept a lid on any additional up-move and has been one of the key factors prompting some profit-taking at higher levels.

It would now be interesting to see if the pair is able to regain traction or extends its pull-back amid absent fundamental driver, in term of any major market moving economic releases, and as investors keep a close eye on developments surrounding a long-awaited US tax cut legislation.

Technical outlook

Mario Blascak, European Chief Analyst at FXStreet writes: "Technically Sterling is set to break on the upside. Should GBP/USD close above $1.3260, November 1st high of 1.3321 is the next bullish target. Both Momentum and Relative Strength Index are pointing higher on the daily chart, supporting the bullish breakout scenario."