GBP/USD Holds Steady Near June Top

GBP/USD started the week out strong but came under pressure after media outlets reported that the prospect of the UK reaching a trade deal with the EU is slim.

Earlier in the week, the Telegraph reported that UK government is under the assumption that trade with the EU will be conducted on WTO terms. Essentially, these are default terms if a deal cannot be reached.

The cause for concern comes as the EU and the UK aren’t able to come to an agreement on various issues and appear to be deadlocked.

But a persistently weaker dollar is helping to underpin the exchange rate which is on the verge of breaking to a four-month high. The trade-weighted dollar index is down 2.6% on the month thus far.

Sterling bulls are also confident that the UK economy will bounce back after an easing of lockdown restrictions earlier in the month. The Office for National Statistics (ONS) reported that online job ads increased in the week to July 17 although remain at about 50% of where they were a year ago.

Later today, the US will report its weekly jobless claims which is expected to show 1.3 million new people filing for benefits. Tomorrow, the UK will release retail sales figures for June as well as PMI numbers for both the manufacturing and services sectors. As a result, it could be a volatile day.

Technical Analysis

GBP/USD fells sharply in early trading yesterday but buyers promptly lifted the pair higher from support at 1.2650. This is a long term level that has acted as strong resistance in the past and is now seen as major support.

The hurdle to the upside falls at 1.2740. Once again, this is a level that has acted as both support and resistance and has triggered meaningful moves in the past.

While below it, the pair remains at risk of a pullback, although the upward momentum since yesterday hints that the pair may attempt to make a bullish break.

Bottom Line

• GBP/USD has bounced back firmly from yesterday’s dip and is threatening a major resistance level.
• Friday could be a volatile day for GBP/USD with several important data releases from both the UK and the US.

For a look at all of today’s economic events, check out our economic calendar