GBP/USD analysis: Move beyond 1.2200 mark to pave way for additional recovery
|- Last week’s upbeat UK macro data underpinned the British Pound.
- Absent Brexit-related headlines prompted some short-covering.
- A modest USD pullback remained supportive of the steady bounce.
The GBP/USD pair gained some follow-through traction on Friday and built on its modest recovery from the vicinity of the key 1.20 psychological mark, or fresh multi-year lows set earlier during the week. In absence of any negative Brexit-related headlines, the British Pound remained supported by last week’s mostly upbeat UK macro releases - employment details, consumer inflation figures and monthly retail sales data - and finally managed to snap four consecutive weeks of losing streak against its American counterpart.
The pair climbed to over one-week tops - levels beyond mid-1.2100s - and was further supported by a report that the Labour Party was moving closer to cooperation with the Scottish National Party (SNP) to block a no-deal Brexit. This coupled with a modest US Dollar pullback following the disappointing release of the prelim UoM Consumer Confidence Index - slumping to 92.1 in August - provided an additional boost and remained supportive of the positive mood around the major.
The pair held steady above mid-1.2100s at the start of a new trading week as market participants now look forward to the UK Prime Minister Boris Johnson’s trip to the EU - scheduled to visit Germany and France on Wednesday and Thursday respectively. Apart from Brexit-related developments, investors this week will also confront the release of the latest FOMC meeting minutes, which will be followed by the key Jackson Hole Symposium. In the meantime, the pair could attempt to extend the ongoing recovery momentum amid absent relevant market-moving economic releases on Monday - either from the UK or the US.
Short-term technical outlook
From a technical perspective, any subsequent recovery is likely to confront fresh supply near the 1.2200 round figure mark, which is followed by a well-established downward sloping trend-channel resistance breakpoint - now turned resistance - around mid-1.2200s. Only a decisive move beyond the mentioned hurdles might negate any near-term bearish bias and prompt some additional short-covering move, assisting the pair to aim towards surpassing the 1.2300 handle. On the flip side, the 1.2125-20 region now seems to protect the immediate downside ahead of the 1.2100 mark, below which the pair seems all set to resume its prior bearish trajectory and head towards testing sub-1.2000 level with some intermediate support near the 1.2070-60 region.
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