- GBP/USD extends pullback from 1.2543 amid a fresh wave of declines.
- Experts criticize UK PM Johnson’s removal of a two-meter social distance rule.
- Brexit woes remain in place as British policymakers push for market access.
- Lack of major data, the mixed performance of risk catalysts confuse the traders amid US dollar bounce from a two-week low.
GBP/USD eases to 1.2512, down 0.06%, while heading into the London open on Wednesday. The Cable recently surged to the highest since June 18 but failed to keep the gains amid doubts over the easing of the UK’s coronavirus (COVID-19) lockdown restrictions. Also weighing on the pair are worries over the next week’s key Brexit talks as well as the US dollar’s recovery moves. Moving on, the pair traders will have a few factors to watch on the calendar, which in turn makes qualitative risk guides the key for near-term direction.
Global market initially cheered UK PM Boris Johnson’s defying of social distancing measures and opening of pubs, cinemas, etc. to move further away from the virus-led halt in economic activities. However, the recent doubts by the scientists’ fraternity over the speed of the moving back to normal probed the bulls. “The death toll of people with coronavirus in the UK today passed 54,000 and stands at 54,089. And scientists warn the risk of catching Covid-19 is ten times higher at one meter away than two meter away,” says UK Mirror.
Elsewhere, the Financial Times (FT) came out with the news suggesting the British policymakers’ likely push for market access during the next round of Brexit talks. “The UK government published plans on Tuesday for post-Brexit financial regulation that it claims will maintain the “highest” standards — challenging the EU to decide if it is sufficient to allow British groups continued access to its markets. Papers released by the Treasury set out how it intends to regulate banks, asset managers, and derivative traders when the Brexit transition period ends on December 31, and EU directives no longer apply,” said the news.
On the other hand, the US dollar index (DXY), a gauge of the greenback versus major currencies, bounces off the lowest since June 11 to 96.64 as we write. Reasons for the pullback could be traced to the on and off risk sentiment amid the trade and virus worries. While citing the risk-tone, the US 10-year Treasury yields remain positive around 0.72% whereas stocks in Asia flash mixed signals.
Looking forward, a lack of major data/events can keep the pair traders searching for trade, Brexit and pandemic updates for fresh impetus. Additionally, Fedspeak and UK politics could offer extra directives to justify the latest consolidation.
Technical analysis
21-day SMA and 38.2% Fibonacci retracement level of May-June upside, around 1.2530/35, becomes near-term strong resistance ahead of 1.2600 and 23.6% Fibonacci retracement around 1.2640. Meanwhile, sellers can aim to revisit the downward sloping trend line from June 10, at 1.2500 during the further declines. Though, a clear downside past-1.2500 will recall a 61.8% Fibonacci retracement level around 1.2355 on the bears’ radars.
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