GBP/USD recovers to turn back higher at 1.3070

After dropping back close to Friday's swing lows near 1.3030-20 region, the GBP/USD pair recovered all of its lost ground and turned back higher to currently trade around 1.3070 region.

In absence of any economic releases, the current up-move could be solely attributed to a bout of short-covering after last week's sharp reversal from a 3-week high level to a 3-week low level touched in the aftermath of BOE decision and surprisingly strong US NFP readings for the month of July.

Buoyant sentiment surrounding equity markets has been supportive of a risk-on trade and is seen extending some support to the British Pound. However, increasing prospects of additional BOE monetary policy easing, any recovery might now be utilized as selling opportunities and hence, might restrict any further up-move for the pair. 

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, notes, "the 4 hours chart for the GBP/USD pair shows that the bearish potential remains intact, with the price around 1.3050, below the lower end of the last month's range, and with the 20 SMA accelerating its decline above the current level. In the same chart, the RSI indicator holds around 33, while the Momentum indicator consolidates below its 100 level, lacking downward strength, but with the bearish risk implicit."

"Friday's low was set at 1.3020, the level to break to confirm further declines towards 1.2970/80 in the short term, while below this last, the decline can extend down to 1.2930. The immediate resistance comes at 1.3060, followed by the 1.3100 region. Selling interest around this last, should be enough to contain the upside."