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GBP/USD bolstered from 1.2700, but fresh Brexit anxiety looms ahead

  • The Sterling holds a thinly-bullish technical stance heading into January's Brexit showdown.
  • UK data due today could see limited response as traders keep their eyes open for fresh headlines. 
GBP/USD is building a near-term base close to 1.2730 after the pairing managed to stage a halting recovery from this week's lows near 1.2600, but the upside continues to look limited as January comes in with plenty of Brexit action to keep Pound bulls off-balance.

Wednesday delivers the UK's latest Markit PMIs at 09:30 GMT (forecast 52.5, last 53.1), though the mid-tier economic indicator is set to be completely overshadowed by a fresh bout of Brexit-focused headlines; January sees Prime Minister Theresa May finally delivering her much-despised Brexit withdrawal agreement for a parliamentary vote after several weeks of strategic delay, and opposition party members are also slated to bring forward a parliamentary no-confidence vote in Mrs. May's government.

PM May's original strategy of 'bleeding the clock' by withholding her divorce bill until it was too late to form an alternative should the bill fail ist also looking completely declawed, with key MPs in Britain's parliament seeking to secure a Brexit delay in case of an (almost guaranteed) no-vote on May's deal, a move that will draw plenty of ire from hard-line Brexiteers within May's own Tory party, who are perfectly happy to see the UK collapse out of the European Union without any semblance of a trade deal in place.

GBP/USD Levels to watch

The Sterling's technical outlook against the US Dollar is looking deceptively bullish, with the pair trading into the upside of key technical indicators, but as noted by FXStreet's chief analyst Valeria Bednarik, Brexit concerns can be expected to shake out any bidders caught in a near-term bulltrap:

The 4 hours chart for the pair shows that the pair broke and held above the 200 EMA, for the first time above it since early November. In the same chart, the 20 SMA turned modestly higher, some 200 pips below the current level, while technical indicators barely retreated from overbought levels before stabilizing, somehow suggesting a limited downward potential. Nevertheless, Brexit uncertainty will play against the Pound, despite broad dollar's weakness, and advances will likely be seen as selling opportunities.

Support levels: 1.2710 1.2665 1.2630
Resistance levels: 1.2785 1.2820 1.2850