GBP/USD fades a knee-jerk bullish spike to 1.40 neighborhood

   •  A modest USD retracement triggers the initial leg of up-move.
   •  Short-covering aggravates the bullish momentum.
   •  The momentum already seems to have run out of steam.

The GBP/USD pair quickly reversed an early European session dip to session low level of 1.3924 and surged nearly 70-pips in the last hour, albeit quickly retreated few pips thereafter.

The latest leg of sharp uptick lacked any fundamental catalyst and seems to have been triggered by a modest US Dollar retracement. Despite Wednesday's hawkish FOMC meeting minutes, sliding US Treasury bond yields kept a lid on any further greenback up-move and helped the pair to build on overnight strong rebound from a 6-day low level of 1.3857.

The strong up-move could also be attributed to some cross-driven strength, stemming out of a sharp slide in the EUR/GBP cross, with possibilities of some short-term trading stops being triggered on a move beyond a short-term descending trend-channel further aggravating the momentum. 

The bullish move, however, already seems to have run out of steam ahead of the key 1.40 psychological mark and the pair quickly retreated around 30-35 pips to currently trade around the 1.3965-60 region.

In absence of any major market moving economic releases, either from the US or from the US, central bank speeches would now be looked upon for some short-term trading impetus. Comments by the BOE Deputy Governor David Ramsden and the New York Fed President William Dudley might influence the pair's momentum on the last trading day of the week. 

Technical levels to watch

A follow-through retracement back below 1.3955-50 area might now turn the pair vulnerable to slide further towards 1.3915 horizontal support en-route the 1.3900 handle. On the upside, any up-move might continue to confront some fresh supply near the 1.40-1.4010 region, which if cleared might trigger a short-covering rally towards 1.4075-80 zone.