GBP/USD climbs to session tops near 1.2230-35 region, lacks follow-through
- Some renewed USD weakness helped the pair to find some support at lower levels.
- The upside remains capped amid uncertainty surrounding the UK’s exit from the EU.
The GBP/USD pair reversed an early European session dip to sub-1.2200 levels and rallied around 30-35 pips in the last hour, albeit lacked any strong follow-through and quickly retreated few pips thereafter.
The continued showing some resilience below the 1.2200 round-figure mark and managed to regain some positive traction amid some renewed US Dollar weakness. The latest developments on the US-China trade front threatened to derail already delicate trade negotiations and turned out to be one of the key factors weighing on the Greenback.
Brexit uncertainties continue to cap the upside
It is worth mentioning that the US Administration on Tuesday imposed visa restrictions on Chinese officials over the treatment of Muslim minorities. This was followed by reports on Wednesday that China is planning tighter visa restrictions for US nationals with ties to anti-China groups, though China's foreign minister was out quickly to deny the story.
Apart from a subdued USD price action, the uptick lacked any major fundamental catalyst and remained capped in the wake of overnight reports that Brexit talks between Britain and the European Union were close to breaking down. Meanwhile, the UK PM Boris Johnson reiterated that they would leave the EU by October 31st and revived fears of a no-deal Brexit.
Moreover, the latest comments by the Irish finance minister, Paschal Donohoe clearly indicated that any Brexit deal is nowhere in the offering, which might further contribute towards keeping a lid on any runaway rally for the major. Donohoe said that there is a big gap between the UK and the EU on the crucial Irish backstop issue and constructive engagement is the only choice.
Hence, it will be prudent to wait for a strong follow-through buying before confirming that the recent slide from the vicinity of the 1.2600 handle is already over and (or) positioning for any further near-term appreciating move amid absent relevant market-moving economic releases - either from the UK or the US.
Later during the early North-American session, a scheduled speech by the Fed Chair Jerome Powell might influence the USD price dynamics and produce some short-term trading opportunities ahead of the release of the minutes of the latest FOMC monetary policy meeting held on September 17-18.
Technical levels to watch