GBP/USD: Bears attack 1.2400 as USD strength offsets Brexit optimism
|- GBP/USD stretches Wednesday’s losses to refresh three-day low.
- EU’s softening of stance suggests upbeat start to the next week’s Brexit talks.
- US dollar benefits from broad risk-off moves amid trade, virus fears.
- A light calendar keeps risk catalysts on the driver’s seat.
GBP/USD drops to 1.2404, down 0.10% on a day, while heading into the London open on Thursday. The Cable pair fails to cheer the recent Brexit-positive signs amid the broad greenback strength backed by risk-off sentiment. Though, a light calendar before the US session pushes traders to search for fresh clues concerning the coronavirus (COVID-19) and trade wars for near-term direction.
The Financial Times headline suggesting Brussels’ step-back on the “level playing field” recently offered positive signs before the EU-UK policymakers meet for Brexit talks during the early-July. Additionally, the UK Express also mentions, relying on the former British MEP Andrew Kerr’s comments, that the European Union (EU) is afraid of being left "fighting for its survival" if the UK secures a strong trade deal at the end of the Brexit transition. Elsewhere, the City AM quotes EU’s chief negotiator Michel Barnier to say that Britain can still achieve a post-Brexit trade deal with the European Union as long as the UK stops “backtracking” on its commitments.
Other than the Brexit optimism, global praise of the UK’s COVID-19 combat, vaccine test and easing of the lockdown restrictions are some extra positives favoring the pound pair. Furthermore, no deadline for the UK-US trade deal talks makes it more lucrative versus Japan’s six-week time limit.
Alternatively, the US threats to levy tariffs on the EU/UK goods join the surge in the American virus numbers weigh on the pair and market sentiment. As a result, the US 10-year treasury yields and stock futures extend the previous day’s losses whereas Asian indices also slump despite off at China.
Market watchers may now keep eyes on the UK’s reaction to the bloc’s step forward as well as the trade-negative signals from the US to determine immediate pair moves. Also important will be the US pandemic updates and latest data concerning the Jobless Claims and Durable Goods Orders.
Technical analysis
Failures to cross a three-month-old support-turned-resistance line, currently around 1.2530/35, drags GBP/USD to an ascending trend line since May 18, at 1.2365 now.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.