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Jul 05 - 10:55 PM

GBP/USD - COMMENT-Key Resistance Caps Sterling But Positives Build

By Andrew M Spencer  —  Jul 05 - 08:55 PM

Sterling's downtrend has stalled with the U.S. dollar under pressure since Friday's robust U.S. payrolls data, and positive news from the UK now leaves GBP/USD poised below key resistance.

IMM data on Friday showed that dollar shorts were trimmed to the lowest levels since April during the USD bounce in June nL2N2OE234, so positioning is currently not a major factor for the dollar. Friday's 'Goldilocks' U.S. jobs data weighed on the safe-haven dollar, though =USDtechnically remains in an uptrend nL2N2OH02D.

Sterling saw two positive developments on Monday, with strong services PMI beating expectations, accompanied by rising prices nZRN002C51. Prime Minister Boris Johnson announced a likely end to all COVID-19 restrictions on July 19, counting on high levels of vaccination to contain hospital numbers and casualties from the Delta variant nL2N2OH0BK.
It is a risky strategy, but if successful, will broadly boost the economic recovery and underpin the pound.

Technically the GBP/USD downtrend has stalled and the strong bearish trending signals have dissipated, but the setup remains net negative.
The downside bias remains intact while the 1.3861 10-day moving average holds; it has capped cable for the last two weeks and is currently under pressure.

A close above 1.3861 would suggest a period of consolidation.
A break of 1.3930-50, 38.2% of the June-July fall and 21 DMA, would be bullish.

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Source:
Refinitiv IFR Research/Market Commentary

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