GBP/USD testing key support near 1.2770, will it hold?

The overnight tepid-recovery in GBP/USD lost legs just shy of 1.28 handle in Asia opening trades, knocking-off the rate back towards the key support zone just ahead of 1.2770 levels, where it now wavers.

A minor-bounce staged by the US dollar versus its main peers combined with receding appetite for risk assets appear to be weighing slightly on the risk currency GBP. The USD index found support from latest Trump headlines, as reported by Dow Jones, citing that the US President Trump's administration plans to impose 20% tariff on Canadian soft lumber imports.

Meanwhile, increased cautiousness ahead of the second round of French election on May 7, especially after Le Pen announced her resignation from the National Front leadership, also somewhat dampened sentiment.

Adding to this, alert on a potential North Korean nuclear test expected today also keeps the higher-yield cable on the back foot. Looking ahead, the spot may remain confined within a tight range amid thin markets and limited macro news from the UK docket. Australia and New Zealand markets are closed today in observance of Anzac Day.

Attention now shifts towards the US calendar, with the CB consumer confidence and new home sales data due later on Tuesday, while the main markets moving events for the spot in the week ahead are likely to be Trump’s tax reform plans announcement and GDP figures from both the UK and US.

GBP/USD Levels to consider            

Momentum above 1.2800/01 (round number/ 5-DMA) could lift the pair above 1.2851 (Apr 20 high), beyond which a test of 1.2912 (flash rally high) is imminent. Conversely, a break below 1.2758 (Apr 21 low), leading to a subsequent break below 1.2725 (10-DMA) is likely to drag the pair towards testing its next support near 1.2700/1.2694 (zero figure’ classic    S3).