- GBP/USD finds support at 1.2335 and picks up to 1.2445 area.
- The pound picks up on Brexit hopes and a softer dollar.
- Longer-term, the GBP/USD is at the beginning of an important turn lower – Credit Suisse.
The pound sterling has entered the week on a moderately positive tone against the US dollar, appreciating 0.75% on the day after having lost about 2.5% over the previous two weeks. The pair has taken advantage of a somewhat softer dollar to bounce up from three-week lows at 1.2335, returning to 1.2445 area so far
Pound picks up amid US dollar weakness and Brexit hopes
UK PM Boris Johnson’s meetings with French PM Emmanuel Macron and with the EC President Ursula von der Leyen last week seem to have fed hopes that a UK – EU trade deal is still possible, which has eased selling pressure on the pound. Beyond that, the UK government is expected to ease the COVID-19 restrictions, reducing the social distance rule, which will allow pubs and restaurants to increase their capacities.
Macroeconomic data, however, has failed to boost optimism. British industrial output has posted its largest quarterly decline on record in the three months to June, according to data by the Confederation of British Industry, which provides new evidence to the impact of the COVID-19 shutdown on the British economy.
On the other end, the US dollar has opened the week in a softer tone. The market seems to have shrugged off fears of a second coronavirus wave despite the global increase on infections and has shifted its focus to the incipient signs of economic recovery.
GBP/USD at the beginning of an important turn lower – Credit Suisse
In a bigger picture, the pair remains skewed to the downside which, according to the FX Analysis Team at Credit Suisse, represents the beginning of a major turn lower, “Last week may prove to be decisive for GBP/USD with key supports from the uptrend from March broken and 55-day average removed and with daily MACD momentum having turned lower. With the cross having also essentially rejected its 200-day average in early June we believe this sharply increases the likelihood we are seeing the beginning of an important turn lower.”
GBP/USD key levels to watch
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