GBP/USD correcting the correction after being best performer

GBP/USD is currently under offer after reaching as high as 1.2673 with the pound being strongest of the majors last week.

The pound's correction was a swift rally in an extension of the November uptrend. Analysts at Brown Brothers Harriman (BBH) explained that GBP/USD finished last week with a three-day rally that saw it surpass the flash crash high (~$1.2625) and through the 50% retracement of the leg down that began near $1.3445 in early September ($1.2645). "The 61.8% retracement is near $1.2830. Sterling's low in early July near $1.2800 was not taken out until October. The technical indicators we look at are mixed."

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GBP/USD levels

The analysts at BBH noted that the RSI and MACDs do not indicate a top is at hand, while the Slow Stochastics appear to be about to turn lower and sterling closed above the upper Bollinger Band (~$1.2575).

On a break of the 1.25 handle, GBP/USD has key initial support is 1.2335, the 19th October high and then 1.2090/83, the recent lows. "Failure here would mean a continuation of the descent and should trigger losses to the May 1985 low at 1.1855," argued analysts at Commerzbank.