GBP/USD Analysis: Bulls struggle above 1.2500 amid coronavirus jitters, Brexit uncertainties

The GBP/USD pair built on Friday's intraday bounce of around 50 pips and gained some follow-through traction on the first day of a new trading week. The uptick was exclusively sponsored by sustained selling around the US dollar. Hopes of a sharp V-shaped global economic recovery remained supportive of the upbeat market mood, which continued undermining demand for the safe-haven US dollar and turned out to be one of the key factors that provided a modest lift to the pair. The British pound was further supported by upbeat UK Construction PMI, which rose to 55.3 in June as compared to market expectations pointing to a reading of 47 and 28.9 previous.

From the US, the ISM Non-Manufacturing PMI surpassed even the most optimistic estimates and jumped to 57.1 in June from 45.4 previous. This coupled with worries over the second wave of coronavirus infections provided some respite to the USD bulls. The market concerns that the recent sharp rise in COVID-19 cases might trigger renewed lockdown measures and that the current economic recovery may prove to be short-lived revived demand for traditional safe-haven assets, including the USD. This comes amid persistent Brexit-related uncertainties, which held investors from placing any aggressive bullish bets around the sterling.

The pair struggled to find acceptance above the key 1.2500 psychological mark as the focus remains on the post-Brexit talks between the European Union (EU) and the UK in London. Apart from this, the broader market risk sentiment and developments surrounding the coronavirus saga will play a key role in influencing the pair's momentum on Tuesday amid absent relevant market-moving economic releases, either from the UK or the US.

Short-term technical outlook

The near-term technical bias still seems tilted in favour of bullish traders, though the pair's inability to find acceptance above the 1.2500 level warrants some caution before positioning for any further appreciating move. Any subsequent positive move is likely to confront resistance near the 1.2530-35 region, marking the 50% Fibonacci level of the 1.2813-1.2252 corrective slide. A convincing breakthrough now seems to set the stage for a move towards testing the 61.8% Fibo. level, around the 1.2600 round-figure mark.

On the flip side, weakness below the 38.2% Fibo. level, near the 1.2465 region, might turn the pair vulnerable to accelerate the fall back towards retesting sub-1.2400 levels. The latter coincides with the 23.6% Fibo. level, which if broken decisively might negate the positive bias. The pair might then slide further towards the 1.2350-40 horizontal support before eventually dropping to June daily closing lows, around the 1.2300 round-figure mark.