GBP/USD eyes UK/US Manufacturing PMIs for clear direction below 1.3100

  • GBP/USD bounces off 1.3056 after posting the biggest gains in a decade in July.
  • Coronavirus woes, fears of no-deal Brexit and broad US dollar pullback snapped the Cable back from five-month high.
  • Bulls stay hopeful over the Tory government’s ability to offer more stimulus, positive trade talks with the US and Japan.
  • The early-month activity numbers can offer immediate direction but major attention will be on Thursday’s BOE.

GBP/USD consolidates recent losses around 1.3090 while heading into the London open on Monday. The pair stepped back from March high on Friday but closed July with over 5.5% gains, the highest in a decade. Though, the bulls are catching a breather ahead of the key activity numbers from the US and Britain.

Be it the US dollar’s pullback from over two-year lows or the Brexit woes, not to forget about the coronavirus (COVID-19) crisis following the wave 2.0 confirmation, the GBP/USD has it all to ease from the multi-week top. The pair recently took clues from the Sunday Times’ news suggesting that the UK reviewing Covid-19 fighting options including London lockdown. Also weighing on the quote could be the comments from Britain’s top scientists, as per The Guardian, while saying that secrecy has harmed the UK government’s response to COVID-19 crisis.

Further, Brexit talks have already dwindled and are scheduled for the restart on August 17 for the seventh round. Even if the latest chatter suggests receding odds of a no-deal Brexit, neither Brussels nor the UK shows readiness to ease on their demands for the key stumbling blocks, including fisheries, level playing field, etc. On the positive side, the Telegraph came out with the news suggesting that the businesses are on the recovery mode in the UK.

Talking about the US catalysts, policymakers in America still jostle over the much-awaited aid package. In doing so, they’ve already crossed the expire of jobless claims benefits and show no sign of agreement off-late.

Amid these catalysts, the market’s risk-tone remains directionless as the S&P 500 Futures print -0.05% loss whereas the US 10-year Treasury yields rise 0.7 basis points (bps) by the press time. Further, stocks in Asia-Pacific also print mixed results with Japan’s Nikkei printing most gains with Indonesia’s IDX standing on the other side.

Looking forward, UK’s second reading for July month Manufacturing PMI, expected to confirm 53.6 initial forecasts, can offer immediate direction ahead of the US July month PMIs from the Markit and the ISM. While economics are likely to favor further recovery in the US dollar, risk catalysts say another story and keep the traders on the edge ahead of the BOE.

Technical analysis

Friday’s bearish candlestick formation, namely the shooting start, gains support from oversold RSI conditions to favor the sellers. As a result, the Cable is likely to extend its recent weakness towards the resistance-turned-support line from mid-April, currently around 1.2975. However, 1.3000 round-figures might offer immediate support. On the flip side, buyers may attack 1.3100 to challenge March month’s high near 1.3200.

 

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