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  • GBP/USD struggles to keep the recovery moves from 1.2710, the lowest since July 24 flashed the previous day.
  • UK’s virus-lead deaths rose to two-month high following PM Johnson’s early attempts to rule out national lockdowns.
  • EU’s Brexit negotiator heads to London, German minister asked the UK to “stop playing games.”
  • British Chancellor is reportedly trying to copy German efforts to safeguard the furlough scheme.

GBP/USD attempts recovery from the intraday low of 1.2716 while picking up the bids near 1.2727 during the pre-London open trading on Wednesday. The Cable refreshed multi-day low the previous day after the Bank of England (BOE) Governor Andrew Bailey sound mostly cautious and UK PM Boris Johnson announced activity restrictions to ward off the coronavirus (COVID-19) resurgence risk. While risk reset can be spotted behind the pair’s current pullback, preliminary readings of September month PMIs will be the key to watch. Also important are the Brexit headlines as the European Union’s (EU) chief Brexit negotiator Michel Barnier lands in London ahead of the official September 28 talks.

With the US Congress passing stop-gap funding to avoid a government shutdown in October, market’s risk-tone sentiment improved during Asia. In doing so, the traders might have paid a little attention to the recent coronavirus (COVID-19) cluster found in Brooklyn. While portraying the same, S&P 500 Futures and most of the Asian stocks are trimming the early-day losses by the time of press.

The conditions are also worsening in the UK where COVID-19 related deaths surge the most since July 14, with Tuesday’s death toll being 37. This justifies why British PM Johnson warned, “if R does not go below 1, there could be more restrictions.”

On the other hand, BOE Governor Bailey raised concerns over the economic weakness even before the activity restrictions, which in turn highlights the importance of today’s preliminary readings of September month PMI numbers.

Checkout out the economic calendar for details on forecasts and previous updates.

Ahead of the event, TD Securities said, “We think that the manufacturing PMI should be able to hold up a bit better in September, as the manufacturing sector, in general, has been relatively less affected than services by the lockdown and social distancing measures. So we look for the UK’s manufacturing PMI to slip to 53.5 (market 54.0), as the index has already seen the main benefits from reopening. For the services PMI, we look for a 5 point decline to 53.8 (market 55.9) as the services sector is hit by growing regional lockdowns, and as the EOHO program ends.”

Elsewhere, the Brexit negotiations need a push on fisheries and less noise over the Internal Market Bill (IMB) to break the deadlock in talks. The British parliament recently agreed to have a say over whether the IMB will break the Brexit Withdrawal Agreement Bill or not, if yes it must not harm Northern Ireland. The development may offer initial optimism during the talks.

Other than the aforementioned catalysts, the second version of the Fed Chair’s testimony can also offer additional clues to the pair traders.

Technical analysis

The cable dropped to the lowest since July 23 the previous day but a confluence of the key SMAs and 61.8% Fibonacci retracement of its late-June to the early-September upside barred sellers afterward. However, bearish MACD requires the buyers to cross the September 11 bottom of 1.2762 to extend the latest U-turn. In doing so, the 1.2800 threshold could become their next choice. On the downside, the 1.2726/20 support confluence becomes the key to watch as a daily closing beneath the same can easily break the 1.2700 round-figure while targeting the early-July tops near 1.2660/65.