GBP/USD quickly reverses a knee-jerk slide to sub-1.30 level

   •  Trade-related headlines trigger safe-haven flows and prompted some weakness.
   •  Brexit optimism/upbeat UK jobs data underpinned GBP and helped limit downside.
   •  The latest BoE decision/US macro data might help determine the near-term trajectory.

The GBP/USD pair reversed a knee-jerk fall to sub-1.30 level and quickly recovered around 50-60 pips from session low touched in the last hour.

The pair's sudden collapse of around 100-pips from an intraday high level of 1.3087 coincided with news that China has asked the World Trade Organization (WTO) for authorization to impose trade sanctions on the US. The headlines triggered some risk aversion trade, evident from a sharp slide across European equity markets, and prompted typical safe-haven flows towards the US Dollar. 

The downfall to 1.2988 area was quickly bought into and was being limited on the back of overnight optimistic comments by the EU's chief Brexit negotiator Michel Barnier, saying that a Brexit deal with the UK is realistic within six to eight weeks. Adding to this, today's release of stronger than expected UK employment details, especially wage growth data, further underpinned the British Pound and helped limit further downside.

The pair now seems to have stabilized around the 1.3040 region and in absence of any major market moving economic releases, might continue to oscillate in a range ahead of this week's key event risk - the BoE monetary policy decision. This coupled with the upcoming important US macro data - the latest consumer inflation figures and monthly retail sales will help investors to determine the pair's next leg of directional move. 

Technical levels to watch

The 1.3090-1.3100 region now becomes immediate resistance to clear, above which the pair is likely to aim towards reclaiming the 1.3200 handle with some intermediate hurdle near the 1.3140 area. On the flip side, the 1.2990-85 region might continue to protect the immediate downside, which if broken might prompt some additional long-unwinding trade and drag the pair back towards the 1.2930-25 horizontal support.