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

Haresh Menghani FXStreet

• 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."

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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