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Saturday, July 11, 2020

GBP/USD snaps four-day losing streak to recover from monthly low towards 1.2400 | Forex Cr

GBP/USD stretches pullback moves from 1.2336, questions further bearish bias. UK Chancellor Sunak targets VAT to combat COVID-19, British PM Johnson will
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  • GBP/USD stretches pullback moves from 1.2336, questions further bearish bias.
  • UK Chancellor Sunak targets VAT to combat COVID-19, British PM Johnson will unveil guidelines to further ease lockdown restrictions.
  • ECHR adds barriers to next week’s Brexit negotiations, attacks in the UK gain a little footage.
  • Brexit, virus updates, UK CBI survey data can offer immediate direction.

GBP/USD eases from the intraday high of 1.2377 to 1.2372 while heading into the London open on Monday. Even so, the Cable pair registers the first positive day, with 0.20% gains on a day, in five as bouncing off the month-start low. Risk reset and mildly positive headlines concerning the UK seem to propel the pair’s latest pullback. Though, fears of Brexit and broadly cautious market mood, coupled with a light calendar, doubt the quote’s further recovery.

Although stabbing rampage offered initial weakness to the GBP/USD prices, calls that the UK Chancellor Rishi Sunak will offer a cut in the Value Added Tax (VAT) to ease the fight against the pandemic seems to favor the quote off-late. Also supporting the pair’s recovery moves could be expectations of the further easing of lockdown restrictions by the UK PM Boris Johnson during this week. Additionally, recovery in China’s coronavirus (COVID-19) numbers and US President Donald Trump’s refrain from further punitive measures on the dragon nation have contributed to the market’s risk reset, which in turn drags the US dollar and helps the pound pair.

On the negative side, the British policymakers have once again poured cold water on the face of the European Union (EU) diplomats ahead of the next week’s key Brexit talks. As per the UK Express, “Britain has rejected EU demands that it commit to remaining part of the European Convention on Human Rights (ECHR), blocking progress on intelligence sharing and a treaty to replace the European Arrest Warrant system.” Elsewhere, China’s latest moves on the Hong Kong Security Bill could trigger the fresh tension between the UK and Beijing.

Amid all these catalysts, the US 10-year Treasury yields take rounds to 0.69% whereas stocks in Asia recover the early-day losses to portray the risk reset.

Looking forward, the pair traders will keep eyes on the UK’s CBI Industrial Trends Survey data, expected -59 versus -62 prior, for fresh impulse. Though, the major attention will be given to the qualitative catalysts during the UK/European session. Talking about the US session, Chicago Fed National Activity Index and Existing Home Sales could entertain the market players but risk factors will still occupy the driver’s seat.

Technical analysis

Despite recently bouncing off the monthly low, the GBP/USD pair stays below 200-bar SMA level of 1.2415 while staying inside a short-term falling channel. As a result, the channel’s support line around 1.2280 becomes the immediate support for the traders to watch for a bounce, failing to which can recall the 1.2200 mark on the chart.

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