- GBP/USD recovers from 1.2490 as US dollar fades upside momentum.
- Fears of no Brexit deal in July, virus worries and UK-China tussle keep the bears hopeful.
- Bulls await British Chancellor’s another attempt to combat the pandemic.
- Market sentiment struggles for clear direction amid mixed signals, lack of major data/events.
GBP/USD repeats its inability to stay bid beyond 1.2500 while taking a U-turn from 1.2518, currently around 1.2502, ahead of the London open on Tuesday. The pair struggles for a clear direction amid fears of a hard Brexit and the US dollar’s market reaction amid a day offering a light calendar. Even so, the on-going departure talks between the European Union (EU) and the UK in London becomes the key to watch for immediate direction.
Following the last week’s failure to break the Brexit deadlock, policymakers are in England to offer yet another attempt in agreeing over the post-departure trade linkages. However, Irish diplomat recently signaled that no deal is anticipated before October. Further to disappoint the Brexit optimists, a German newspaper Augsburger Allgemeine poured cold water on the face of those who anticipate Angela Merkel’s appointment to the rotating presidency will benefit the Tories. Elsewhere, British negotiators led by David Frost have disrespected any push to extend the deadline after missing a final date to file a form that could have helped London keep its regional market access.
Other than the Brexit, fears of the coronavirus (COVID-19) resurgence in the nation, due to the government’s easing of lockdown restrictions gained additional strength after British authorities shut doors for official publishing of routine virus data. Further, the London-Beijing tension after Huawei ban and British sanction on the human rights violators from Russia and Saudi Arabia exert additional downside pressure on the pound. Though, hopes that Chancellor will unveil a major set of relief package to the British people seem to challenge the bears. Also on the positive side could be the US dollar’s weakness despite printing upbeat figures.
The US dollar index (DXY) stays sluggish near a two-week low amid a hike in the pandemic figures and global rush towards equities. The later might have taken clues from China as well as the US ISM Non-Manufacturing PMI, not to forget signals for additional stimulus.
Moving on, the traders will keep eyes on the risk catalysts amid a lack of major data, except for the US JOLTS Jobs Openings, expected 4.85M versus 5.046M. In doing so, Brexit, coronavirus and China are the keywords to search for.
Technical analysis
GBP/USD buyers are struggling to justify the 100-day EMA breakout as a two-week-old falling trend line, currently around 1.2525, restricts further upside. As a result, odds of the pair’s pullback to 21-day EMA level of 1.2463 can’t be ruled out. However, 50% Fibonacci retracement level of May-June upside, at 1.2440, may disappoint the bears afterward. Meanwhile, a successful rise past-1.2525 could favor the bulls to attack 200-day EMA level near 1.2600.
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