- GBP / USD maintains the rally from 1.3193 to maintain intraday losses.
- European envoys take Brexit off the agenda, UK service companies report heavy job cuts.
- The Conservative government is preparing more aid to fight the virus and tone down OECD remarks.
- Markets are awaiting US GDP, Fed Chairman Powell’s speech for new momentum.
Despite the rally from 1.3193, GBP / USD is struggling to hold 1.3200, currently around 1.3209, as it heads towards the London open on Thursday. In doing so, Cable is following the hiatus in global markets ahead of the keynote address at the Jackson Hole Symposium, Wyoming.
Besides the mood of traders, a report from the Confederation of British Industry (CBI) and comments from the Organization for Economic Co-operation and Development (OECD) are also weighing on the pair. CBI said, in its Thursday post, “Businesses dependent on consumer spending – many of which only reopened in recent weeks after the lockdown – have cut jobs at the fastest rate on record.” In contrast, the OECD described the record quarterly recession in the UK economy as worrying.
In addition, news that EU envoys have abandoned post-Brexit negotiations over Britain and the European Union as the subject of next week’s meeting also weighs on the quote.
Elsewhere, new challenges in US-China relations are weighing down market sentiment. The Trump administration is preparing to sanction companies helping China mark its existence in the South China Sea after the dragon nation fired missiles during exercises around the questionable region. In addition, US Secretary of State Michael Pompeo criticized Beijing for “coercive intimidation tactics against our friends in the UK”.
Amid all these catalysts, the US Dollar Index (DXY) ends the two-day losing streak while taking turns to 92.90. However, traders are still worried as the second release of Q2 GDP is likely to keep economic pessimism on the chart while the Fed Chair could disappoint markets if it transmits the accommodative bias.
Given RSI overbought conditions on the four-hour chart and the pair’s multiple failures to stay above 1.3200, the 06 Aug high of 1.3185 acts as immediate support ahead of Tuesday’s high near 1.3170 . However, the pair’s prolonged weakness beyond 1.3170 will be challenged by 50% and 61.8% Fibonacci retracement levels around 1.3120 and 1.3090 respectively. Alternatively, buyers will wait for a sharp break out of the short term resistance line, currently around 1.3235, before taking entries to target the monthly high near 1.3270.