The GBP/USD currency pair stopped its previous Month winning streak and now traded with a mild bearish bias below 1.3100 level mainly due to the broad-based U.S. dollar fresh strength, possibly supported by the mild risk-off market sentiment. On the other hand, the reason behind the currency pair declines could also be associated with the coronavirus woes.
The looming Brexit uncertainty also joined the on-going pessimism around the cable and contributed to the currency pair losses. In the meantime, the U.K. government's willingness to offer more stimulus and the positive trade talks with the U.S. and Japan became the key factors that kept the lid on any further losses in the currency pair.
Many factors have been impacting negatively on the cable currency on the day. Be it broad-based U.S. dollar strength or the on-going Brexit worries, the currency pair erased its gains from the multi-week high. Apart from this, the coronavirus (COVID-19) crisis and some downbeat comments from Britain's top scientists weighed on the quote off-late. As per Britain's top scientist's comments, secrecy has harmed the U.K. government's response to the COVID-19 crisis.
Considering the ongoing situation of coronavirus in the U.K., the U.K. government is thinking of imposing renewed lockdown restrictions to control Covid-19, which eventually exerted further burden on the local currency. The officials from the UK-EU both sides were failed to produce any progress during the 6th-round of Brexit talks. So, the talks were rescheduled on August 17 for the 7th-round. However, both sides still have differences over the fisheries, level playing field, etc., which kept the investors cautious.
On the positive side, the U.K. companies were on the recovery track, as per the Telegraph reports, which provided slight support to the currency pair and limited its deeper losses.
However, the non-stop surge of coronavirus in the U.S. and intensifying tension between the U.S. and the rest of the global economies like the European Union (E.U.), the U.K., and China also exerted downside pressure on the currency pair. As well as, the U.S. policymakers still struggled over the much-awaited aid package and showed no progress on it even after they have already crossed the expire of jobless claims benefits. This also added a burden on risk sentiment.
As in result, the broad-based U.S. dollar erased its previous losses and flashed green, at least for now. However, the U.S. dollar gains could be short-lived or temporary due to the worries that the economic recovery in the United States could be stopped in the wake of the resurgence in coronavirus cases. However, the gains in the U.S. dollar kept the GBP/USD currency pair under pressure. Whereas, the U.S. Dollar Index that tracks the greenback against a basket of other currencies gained 0.11% to 93.535 by 9:47 AM ET (2:47 GMT).
The market players are keenly awaiting the early-month activity numbers from the U.S., and the U.K.'s second reading for July month Manufacturing PMI, which is expected to confirm 53.6 initial forecasts, will be key to watch and provide fresh direction in the pair. Moreover, the USD price moves and coronavirus headlines will play a key role in determining the intraday momentum.
Daily Support and Resistance
Pivot Point 1.3109
The GBP/USD is trading bearish at 1.3025 area, having crossed below the upward trendline support level of 1.3060 level. On the lower side, the GBP/USD pair can drop further until 1.2944 level while the resistance stays at 1.3054. In the daily timeframe, the cable has formed a bearish engulfing candlestick pattern, which is followed by a solid b bearish marubozu candle at 1.3100 level. With this, the odds of selling seems more solid until 1.2944 level today. The RSI and 50 EMA are supporting selling bias in the GBP/USD pair. Consider selling below 1.3060 level today. Good luck!