GBP/USD Heads Towards Weekly Lows as Sellers Continue to Defend Resistance

The pound to dollar exchange rate made a strong push higher after testing support near the 1.2500 handle earlier this week, however, overhead resistance at 1.2650 continues to hold sellers and has caused a reversal of short-term momentum.

The 1.2650 level served to hold the pair lower on two attempts in April and also capped gains for the currency pair last week.

The labor market in the UK continues to improve with the latest economic data showing a decline of 28 thousand people seeking jobless claims in June. This was well ahead of expectations as analysts had predicted an additional 250 thousand people would be filling for benefits last month.

While the number of people on payrolls declined by 650 thousand in June compared to March, the Office of National Statistics commented that the rate of decline has slowed as a bulk of the decline in employment took place at the start of the pandemic.

Along with the jobless claims report, the unemployment rate was reported to hold unchanged at 3.9% in May.

Later today, the European Central Bank will share it’s latest monetary policy decision which typically causes some volatility in the dollar. The US will release its weekly unemployment claims report which is expected to show an additional 1.25 million jobs lost.

Technical Analysis

GBP/USD had shown strong upward momentum after bottoming on Tuesday but the selling pressure from resistance at 1.2650 could be signaling a near-term trend change. The pair has wiped out about three-quarters of the recovery thus far.

The level of interest to the downside falls at 1.2495 with further support from the 20-day moving average near Tuesday’s low.

The trend for the month thus far has been bullish and the dollar has shown persistent weakness which tilts the odds in favor of more upside for GBP/USD. However, a sustained break below the 20-day moving average could lead to an extension towards 1.2343.

Bottom Line

• GBP/USD has come under pressure as the dollar is attempting to recover on the back of a decline in risk appetite.
• The currency pair continues to hold within its weekly range with critical support at 1.2495, near the 20-day moving average.

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