The GBP/USD currency pair extended its previous 6-day winning streak and took bids above mid-1.2800, mainly due to the broad-based U.S. dollar weakness, triggered by the worries that the second wave of COVID-19 cases could undermine the U.S. economic recovery. The upticks in the U.S. stock futures also added pessimism around the U.S. dollar and contributed to the currency pair gains. Upbeat U.K. data were also supporting the bid tone around the pound. Besides this, the looming Brexit uncertainty also kept the lid on any additional gains in the currency pair. The GBP/USD is trading at 1.2834 and consolidating in the range between the 1.2785 and 1.2857.
At the US-China front, the tussle between the US-China picked up further pace after China ordered the U.S. office's closure in Chengdu, a tit-for-tat reply for the United States' previous move over the Chinese office closure in Houston. The U.S. Secretary of State Michael Pompeo called for an end of "engagement," a policy that has defined U.S.-China relations for approximately 5-decades, which also fueled the already intensified tussle.
Despite this, the broad-based U.S. dollar failed to attract any safe-haven bids. Instead, it was further pressured by a positive tone around the equity markets. The losses in the U.S. dollar were further bolstered by the U.S.' failure to deliver the additional coronavirus package and a record rise in the number of daily COVID-19 cases, which fueled worries that the resurgence of COVID-19 cases could undermine the U.S. economic recovery. Whereas, the losses in the U.S. dollar kept the currency pair higher.
The United States crossed 4 million officially recorded Covid-19 cases and covered a significant part of that recorded in just the last 15 days. California, with a population of almost 40 million, about twice Florida's, is now the worst-hit state, near 450,000 cases. Globally, the number of coronavirus infections has now crossed 16 million, as per the Johns Hopkins University report. However, the non-stop virus cases continued to affect global economic growth. This made the U.S. dollar fell to 22-month lows and helped the currency pair.
Apart from this, the tussle between the United Kingdom and China also remained on the card, which was started by U.K.'s decision to phase out Huawei's technology, and more recently, the cancelation of the extradition treaty with Hong Kong in the wake of Beijing's tighter grip on the city-state. However, these gloomy updates failed to grab the currency pair lower, at least for now.
There is still no update in the talks at the Brexit front even after the fifth round of talks failed last week. The E.U. chief negotiator Barnier said that a deal by the end of the year seems not to happen, as well as he cleared that they are "still too far away." The U.K. negotiator David Frost agreed on the sharp differences but believed that a deal is still possible. However, the fears of no-deal Brexit might further contribute towards capping any strong gains for the GBP/USD pair, at least for now.
For now, the Durable Good Orders release and German IFO survey for June will be key to watch. Additionally, the U.S. stimulus progress will be closely observed ahead of the U.S. Federal Reserve (Fed) monetary policy decision, which is due to happen on Wednesday.
Daily Support and Resistance
S1 1.255
S2 1.2638
S3 1.269
Pivot Point 1.2725
R1 1.2777
R2 1.2812
R3 1.29
The GBP/USD pair is trading with a strong bullish bias at 1.2848 level, with an immediate resistance at 1.2878 level. Closing of three white soldiers on the 4-hour timeframe is supporting bullish bias in the pair. On the higher side, the next resistance is likely to be found around 1.2878 and 1.2942 level. The RSI and 50 EMA are in support of the buying trend in the GBP/USD pair. I would say, let's stay bullish over 1.2785 level to target 1.2878 and 1.2942 level today. Good luck!