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GBP/USD Bids Near 1.3075 Supported By Upward Trendline - Brace for Breakout!


The GBP/USD succeeded in stopping its Friday's sharp losses and took modest bids near above 1.3050 level on the day, having hit the high of 1.3078 level, mainly supported by the Brexit optimism, UK-Japan trade talks and hopes of further stimulus. The broad-based U.S. dollar fresh strength, backed by Friday's better-than-expected employment report, became the key factor that kept the lid on any additional currency pair gains. In the meantime, the fears of further hardships for the U.K.'s labor market in the wake of the coronavirus crisis also weighed on the quote and capped further upside in the currency pair. The GBP/USD is trading at 1.3069 and consolidates in the range between the 1.3041 - 1.3076. Moving on, the currency pair traders seemed cautious to place any strong bid as they are awaiting U.S. traders' reaction to President Donald Trump's latest executive orders.

The U.S. President Donald Trump not only allowed $400 unemployment benefits but also gave support to American citizens living in the rented house and also on student loans. This initially helped the market trading sentiment. On the contrary, the U.S. President Donald Trump warned U.S. peoples to stop doing business with TikTok and WeChat, not to forget sanctioning Hong Kong Leader Carry Liam, on Friday. However, these gloomy updates keep challenging the risk-on market sentiment.

The upbeat market sentiment got any additional boost after U.S. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin showed a willingness to resume stimulus negotiations, which instantly increased probabilities of a stimulus deal among the U.S. policymakers. However, the gains in the equity market were being supported by the positive outcome from the U.S. nonfarm payrolls on Friday. The NFPs increased by 1.763 million in July against 1.480mn expected and +4.79mn in June. Simultaneously, the unemployment rate fell to 10.2% from 11.1% in June, now some way below the record high of 14.7% in April.

As in result, the broad-based U.S. dollar succeeded in gaining some positive traction on the day, but the bullish bias in the U.S. dollar is expected to be short-lived as doubts remain about the U.S. economic recovery amid on-going coronavirus cases. However, the U.S. dollar gains became the key factor that capped further upside in the currency pair. Whereas, the U.S. Dollar Index that tracks the greenback against a basket of other currencies dropped by 0.11% to 93.308 by 10:16 PM ET (3:16 AM GMT).

At the Brexit front, the British diplomats like Michael Gove and Rishi Sunak ready are showing a willingness to compromise on Brexit talks by September without citing any strong pieces of evidence. Elsewhere, the gains in the currency pair were further bolstered by the positive reports that British Prime Minister Johnson would reopen the schools in September.

Apart from this, Japan continues to talk with the U.K. about trade even if denied on the push to recall auto tariffs before 2026. However, the U.K.'s good progress on the trade talks with Japan exerted some positive impact on the currency pair.

On the negative side, the fears of a larger job loss and further hardships for the U.K.'s labor market, triggered by the report of the British Chartered Institute of Personnel and Development, which found the number of employers expecting to make redundancies had surged from 22 % earlier this year to 33 % for the 3-months to the end of September." This statement capped the quote upside momentum.

In the absence of a British calendar, the market players will closely follow risk catalysts like Brexit, coronavirus (COVID-19), and the market traders will keep their eyes on the USD price dynamics, which could play an important part in changing the intraday momentum.

Daily Support and Resistance

S1 1.2817

S2 1.2941

S3 1.2996

Pivot Point 1.3065

R1 1.312

R2 1.3189

R3 1.3312

The GBP/USD is trading at 1.3052 level, holding over the support level of 1.3037 level. On the 4 hour timeframe, the upward trendline is likely to support the Cable at 1.3035 level. Violation of a 1.3035 support level can extend selling bias until 1.2944 level. On the higher side, the GBP/USD can soar until 1.3173 level, which is extended by a double top resistance level. The RSI and 50 EMA are also supporting selling bias in the market. Let's consider selling below 1.3035 and buying over 1.3035. Good luck!

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