GBP/USD stabilizes above 1.2700, recovery limited by 1.2775

GBP/USD is falling sharply affected by the UK election results. The pair bottomed today at 1.2632. From the lows bounced to the upside. The recovery from the lowest was capped by the 1.2775 area. During the last hours, it has been hovering in a range between 1.2750 and 1.2700. Cable stabilized around 1.2720/40, 200 pips below the level it had 24 hours ago. 

Theresa May announced today that she will form a government with the help of the Democratic Unionist Party and removed some uncertainty. Specialized media is now reporting that she will ask her top five ministers to remain in the government, including Philip Hammond and Boris Johnson. 

UK - Parliamentary elections trigger thunderstorm

Supported by the 20-wma

The pair is about to end the week lower. Price remains above the 20-week moving average that stands around 1.2680. A weekly close below would be a negative signal for the pound. 

If the correction from 2017 highs that reached three weeks ago above 1.3000, is capped by the 1.2630/60 area, a sustainable rebound seems possible. 

From a fundamental perspective, the pound in the short-term is likely to remain under pressure. If the political uncertainty is left behind, then it could gain support. Next week, besides UK politics, the GBP/USD pair will be influenced by the FOMC decision (Wednesday).