GBP/USD: volatility back with countdown to US elections

On the back of better economic data and a less dovish BoE, GBP/USD has garnered some strength in recent sessions, rallying from the half-way mark on the 1.21 handle to recent highs of 1.2555, although there remains an air of caution in Sterling in respect to the recent high court ruling that parliament will indeed debate on Article 50 and Brexit while the referendum was legally only advisory. 

However, Jeremy Corbyn, leader of the Labour party, has recently said that he will vote to lead Britain out of the EU and told a newspaper that he would join forces with Remain supporters in other parties to block the process for leaving the European Union if the Prime Minister doesn't offer a guaranteed access to the single market and other conditions, raising prospects for yet more volatility in sterling.

Meanwhile, we await the US elections this week and given the FBI's recent U-turn and conclusions that there have been no criminal activities in Clinton's emails, she has a stronger chance of winning which could be supportive of the greenback this week and further into the month ahead of the FOMC in December who are expected to hike interest rates. 

GBP/USD levels

Sterling rallied through the  the 5-month downtrend at 1.234 and then through the 1.2500 psychological resistance. The next major levels are 1.2798/1.2840 6 th July low and 38/2% retracement of the entire move down from June. "Initial support is 1.2335, the 19th October high. Recent lows remain 1.2090/83," suggested analysts at Commerzbank, adding, "Failure here would mean a continuation of the descent and should trigger losses to the May 1985 low at 1.1855. Our intraday Elliott counts are suggesting a decline to 1.1630."