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GBP/USD Erased Early-Day Losses & Rose Closer To 1.2600 - What's Next?

EagleFX

The GBPUSD currency pair succeeded in stopping its early-day losses and took bids just blow 1.2600 level due to modest upbeat trading sentiment backed by the vaccine success hopes that undermined the broad-based US dollar and contributed to the currency pair gains. The reason for the currency pair's bullish bias could also be attributed to the positive report that UK PM Johnson ruled out the second national lockdown. Whereas, the pessimism surrounding Brexit and tussle with China limited the optimism surrounding the British pound. At this moment, the GBP/USD currency pair is currently trading at 1.2591 and consolidating in the range between 1.2518 - 1.2595.

On the positive side, the British company recently reported positive results for a cure for COVID-19. While a full examination of its treatment is still awaited, the announcement already triggered a triplication of its shares and UK authorities could fast-track its application. Whereas, the AstraZeneca, a large UK-based pharma firm will likely announce another phase in its coronavirus vaccine candidate later on Monday. However, these developments are helping the British pound and supporting the broader market mood.

At the China-UK front, the pair traders got an additional burden after the Dragon Nation showed readiness to fight the UK’s steps over the Hong Kong issue. As we know, the Dragon Nation became the enemy of many western countries after imposing the Hong Kong security law.

China’s Foreign Ministry spokesman Wang Wenbin urged the UK to avoid taking any steps against Beijing, over the Hong Kong issue while speaking in a daily media briefing on the day. He also warned that “China would react resolutely to actions in the former British colony of Hong Kong that interfere in China’s internal affairs.” Whereas, the British Foreign Secretary Dominic Raab is expected to suspend the UK's extradition treaty with Hong Kong on Monday due to London and Beijing's rising tensions, as per the BBC's latest report. These headlines played their part in capping the further upside in the GBP/USD pair.

At the Brexit front, the Brexit talks are expected to resume after several rounds of failure. Both sides acknowledged that Brussels offered London concessions, but the UK said that these were insufficient while the bloc stated they have not been reciprocated. Low expectations for any breakthrough during the summer indicate a limited downside for pound.

Before starting the Brexit talks, the UK PM Boris Johnson’s adviser Dominic Cummings urged British officials to stick strongly to their red lines to get the best Brexit deal possible. While the last week’s signals from the BOE Governor Bailey suggested the probability of negative rates, also exerted some downside pressure on the currency pair.

Despite the ever-increasing number of new coronavirus cases and the possibility of renewed lockdowns, the broad-based US dollar failed to put any bid and reported losses on the day. Although, the losses in the US kept the pairs' prices high. Whereas, the U.S. Dollar Index that tracks the greenback against a basket of other currencies dropped to 95.823.

In the absence of the major data/events to be released on the day, the market traders will keep their eyes on USD price dynamics and coronavirus headlines, which could play a key role in influencing the intraday momentum. Additionally, the speeches from the BOE’s Haldane and Tenreyro will be key to follow.


Daily Support and Resistance

S1 1.2424

S2 1.2488

S3 1.2527

Pivot Point 1.2551

R1 1.2591

R2 1.2615

R3 1.2679

On the technical side, the GBP/USD is trading in a bullish channel which is supporting the pair at 1.2520 level. The Cable has recently crossoed over 50 EMA resistance at 1.2550 level and bullish crossover of this level is sugeesting odds of bullish trend continuation until 1.2670 level. On the higher side, the crosser of 1.2670 can lead the GBP/USD pair until 1.2797 level. Conversely, the bearish breakout of 1.2520 level can lead the GBP/USD pair until 1.2340 level. Let's look for buying trades over 1.2550 level today. Good luck!

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