GBP/USD off multi-week lows, but struggling to extend recovery further beyond 1.27 handle

Selling pressure around the British Pound seems to have abated, with the GBP/USD pair recovering over 60-pips from 7-week low level and moved back closer to the 1.2700 handle.

The pair nose-dived on Friday and fell over 300-pips from mid-1.2900s after May's Conservative party lost its majority in the UK vote. However, with Labour Party coming forward to form a minority government, receding fears of 'hard Brexit' helped the pair to pare some of its steep losses to 1.2935 level, the lowest since April 18 when the UK PM Theresa May announced snap election.

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As investors continue to assess the effects of a coalition government on the outlook for Brexit negotiations, strong bullish trading sentiment around European equity markets benefitted risk associated assets, including the British Pound, and prompted some short-covering.

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It, however, remains to be seen if the recovery is backed by some genuine buying or is just a technical pull-back from near-term oversold conditions, from the vicinity of 100-day SMA important support. 

Traders now look forward to the release of UK industrial and manufacturing production, and goods trade balance data in order to grab some short-term trading opportunities.

   •  UK: Industrial production and trade data in focus - Nomura

Technical levels to watch

Any further recovery now seems to confront immediate resistance near 1.2735 level, above which a fresh bout of short-covering could lift the pair back towards 1.2760-70 important horizontal support break-point now turned resistance. 

On the flip side, multi-week swing lows near 1.2635 level now seems to protect immediate downside, which if broken could accelerate the slide even below 100-day SMA support near 1.2620 region and the 1.2600 handle towards its next support near 1.2580-75 area.