Sterling rebounded from Asia's lows by 1.2337 as U.S. stocks shrugged off coronavirus worries to focus on economic recovery, but the rise could be short-lived if final-status Brexit talks fail to show progress soon.
GBP/USD's rise comes amid broad dollar selling as fears of global economic collapse earlier in the COVID-19 crisis remain in retreat.
However, meandering EU-UK trade talks still threaten sterling's rally, and lack of progress so far heightens uncertainties about Britain's potential post-pandemic economic recovery.
Bulls need a rise above the 10-DMA at 1.2554 to stem negative sentiment. Though data on speculative positioning reflects some sterling optimism [nL1N2DW2CQ], risks for GBP/USD remain tipped to the downside.
Sterling should find support near recent lows by 1.2335/45, as well as the thinning daily cloud top at 1.2307.
A break below there would open the way for a move to 1.2075, the May 18 low, and a further retrace toward early COVID-19 troughs by 1.1413.
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