GBP/USD bounces off 2-month lows, recovers further beyond 1.28 handle

The GBP/USD pair quickly rebounded from post-UK GDP lows near 1.2785 level and is currently placed at session tops, around the 1.2825-30 region.

With markets looking past today's mostly inline UK GDP print for Q2 2017, the pair built on its smart recovery from a fresh two-month low level of 1.2774 touched earlier during the Asian session. The up-move lacked any fresh fundamental trigger and seems to be solely driven by some short-covering move, despite modest US Dollar strength. 

Traders even shrugged off the latest quarterly Confederation of British Industry (CBI) Distributive Trades Survey report that showed UK retail sales volume dropped sharply by -10% m-o-m during August, worse than 15% growth expected. 

Meanwhile, the latest leg of up-move since early European session could also be attributed to cross-driven strength, led by some profit taking slide witnessed around the EUR/GBP cross. 

It, however, remains to be seen if the pair is able to build on the up-move or the current pull-back is again utilized to initiate fresh bearish positions amid weakening sentiment around the British Pound led by dovish BoE and persistent uncertainty over Brexit talks. 

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Next on tap would be the US economic docket, featuring the release of weekly jobless claims and existing home sales data, which could provide some short-term trading opportunities during early NA session. 

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet notes, "the ongoing shallow bounce is not enough to revert the dominant bearish tone, with short-term selling interest now aligned around 1.2830. In the 4 hours chart, the price is below a bearish 20 SMA, while technical indicators have managed to post modest recoveries from oversold levels, but remain well into negative territory,  all of which maintains the risk towards the downside. 1.2770 is the immediate support, with a break below it exposing the 1.2700/20 region for later on the day. Beyond the mentioned 1.2830 on the other hand, the recovery can extend up to 1.2860."