Sterling recovered in U.S. trade from earlier losses, rising off the session low at 1.2885 after the EU said it would not suspend trade talks with the UK over Britain's internal market bill nL8N2G40SA, but the recovery could be fragile as talks on post-Brexit relations remain at an impasse.
GBP/USD's one-big-figure bounce demonstrated it had found support at 1.2885, near its 55-day moving average by 1.2900, a touch above daily cloud top support by 1.2855.
The rising daily cloud may offer support in the near-term but the recent spate of lower highs and lows hints at further sterling weakness.
Thursday's ECB meeting is key to GBP/USD's near-term path.
A dovish ECB, and further EUR weakness, are likely to weigh on GBP/USD.
Recent GBP/USD strength tracked EUR/USD's rally.
An unwind of euro positions is likely to stir broad dollar strength, prodding GBP/USD bulls to turn tail, further reversing summer gains and putting July lows in the mid-1.23's in sharper focus.
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