GBP/USD closing in toward 1.30 psychological level

A softer tone surrounding the greenback helped the GBP/USD pair to build on previous session's rebound from the 1.2900 handle, lifting it back closer to the key 1.30 psychological mark.

Currently trading around 1.2980-85 region, the pair is now just a few pips away from over 7-month highs touched at the beginning of this week. Today's up-move could be attributed to a modest retracement in the US treasury bond yields, which undermined the greenback demand.

Also collaborating to the US Dollar weakness was also due to the US President Donald Trump’s abrupt firing of James Comey as director of the FBI, which some analysts think might hinder progress in securing congressional support for the proposed tax reforms.

Meanwhile, renewed worries over the Korean peninsula, following reports that North Korea plans to proceed with its sixth nuclear test, also weighed on the greenback and collaborated to the pair's up-move.

It, however, remains to be seen if the pair is able to build on early gains and dart towards conquering the psychologically important 1.30 handle, which if breached could trigger a fresh bout of short-covering rally ahead of the next key event risk - BoE Super Thursday.

With an empty UK economic docket, traders are likely to take cues from the release of export / import price index from the US, with the US bond yield dynamics continuing to act as a key driver for the pair’s movement on Wednesday.

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Technical levels to watch

Momentum above yearly tops could find some fresh supply near the 1.30 handle, above which the pair is likely to accelerate the up-move towards its next major hurdle near 1.3040-50 region. On the flip side, 1.2955-50 area now becomes immediate support to defend, which if broken could drag the pair back towards retesting the 1.2900 handle.