GBP/USD analysis: Bulls shrug off no-deal Brexit fears, at least for now

The GBP/USD pair quickly reversed an intraday dip to sub-1.2200 level and regained some positive traction to hit near four-week highs on Friday. China's retaliatory tariffs on USD 75B US imports, coupled with the US President Donald Trump's latest attack on the Fed Chair Jerome Powell prompted some aggressive USD selling. A broad-based USD selloff overshadowed fears of a no-deal Brexit and turned out to be one of the key factors that helped the pair to add to the previous session's strong up-move of over 150-pips.

USD knocked down on escalating US-China trade tensions

It is worth mentioning that an abrupt intensification of the trade war between the world's two largest economies knocked investors' confidence in the global economy and triggered a fresh wave of global risk-aversion trade. This was further seen giving the Fed enough reason to ease the monetary policy further and led a freefall in the US Treasury bond yields, which eventually affected the greenback negatively. Trump's later on Friday announced to raise existing tariffs on $250 billion worth of Chinese goods to 30% from 25% as of October and added that the new round of tariffs on $300 billion in goods will be taxed at 15%, up from the current 10%.
 
Meanwhile, news that the UK PM Boris Johnson had sought legal advice from the attorney general Geoffrey Cox about the possibility of shutting down the parliament for five weeks from September, in order to prevent MPs forcing a further extension to Brexit, kept a lid on any strong follow-through at the start of a new trading week. In absence of any major market-moving UK economic releases on Monday, the incoming Brexit-related headlines might continue to influence the broader market sentiment surrounding the British Pound and provide some short-term impetus.
 
Later during the early North-American session, the release of the durable goods orders data from the US, coupled with fresh trade-related developments would further collaborate towards produce some short-term trading opportunities.

Short-term technical outlook

From a technical perspective, the pair has been struggling to sustain/build on its momentum beyond 200-period EMA on the 4-hourly chart, which should now act as a key pivotal point for short-term traders. Above the mentioned hurdle, the pair seems all set to extend its recent recovery move from the vicinity of the key 1.20 psychological mark - or yearly lows set earlier this August - and surpass the 1.2300 handle to test the next major hurdle near the 1.2330 region.
 
On the flip side, any meaningful pullback below mid-1.2200s now seems to find decent support near the 1.2200 handle, which if broken decisively, leading to a subsequent weakness through the 1.2175-70 intermediate support, might turn the pair vulnerable to head back towards the 1.2100 round figure mark. A follow-through selling has the potential to continue dragging the pair further towards challenging the key 1.20 psychological mark in the near-term.