- GBP/USD staged a strong intraday rebound of around 150 pips on Tuesday.
- Comments by BoE’s Haldane provided a strong boost to the British pound.
- Emergence of some fresh USD selling remained supportive of the move up.
- Investors now eye UK/US macro data and FOMC minutes for some impetus.
The GBP/USD pair witnessed a dramatic intraday turnaround on Tuesday and rallied around 150 pips from the vicinity of monthly lows set in the previous session. The British pound remained depressed through the first half of the day amid doubts over Britain’s ability to pay for its planned massive boost to public spending. This comes amid persistent Brexit uncertainties, which coupled with weaker-than-expected UK GDP print further took its toll on the sterling. The final GDP report released by the Office of National Statistics showed that the economy contracted by 2.2% during the first quarter of 2020, more than 2.0% originally estimated and marked the largest quarterly contraction since 1979.
On the other hand, concerns over surging coronavirus cases around the world continued driving some haven flows towards the US dollar, which further contributed to the pair's early downtick to the 1.2260-55 region. The USD, however, struggled to capitalize on its intraday positive move, instead witnessed some selling and seemed rather unimpressed by Tuesday mixed US economic data, showing that the Chicago PMI edged higher to 36.6 in June. The reading marked a further recovery from 32.3 recorded in May but fell short of consensus estimates pointing a rise to 45. Separately, the Conference Board's Consumer Index jumped to 98.1 in June from the previous month's downwardly revised reading of 85.9.
Apart from some renewed USD weakness, the pair got an additional boost after the Bank of England (BoE) Chief Economist Andy Haldane said that the UK economy is set for a V-shaped recovery. Haldane said that the economy is bouncing back much faster from the coronavirus lockdown than the central bank had expected, which, in turn, cast doubts on the need for further stimulus and prompted some aggressive short-covering around the pound. The pair shot to the 1.2400 round-figure mark, albeit lacked any strong follow-through. The pair lost some ground during the Asian session on Wednesday as market participants now look forward to the final UK Manufacturing PMI for a fresh impetus.
Meanwhile, the US economic docket highlights the release of the ADP report on private-sector employment and ISM Manufacturing PMI. Later during the US session, the minutes of the latest FOMC monetary policy meeting will further influence the USD price dynamics and produce some meaningful trading opportunities ahead of Thursday's closely-watched US monthly jobs report (NFP).
Short-term technical outlook
From a technical perspective, the overnight strong positive move stalled ahead of a resistance marked by the top end of a three-week-old descending trend-channel. The mentioned barrier, around the 1.2415-20 region will now act as a key pivotal point for short-term traders and help determine the pair’s next leg of a directional move. A convincing breakthrough now seems to assist the pair to surpass an intermediate resistance near the 1.2445-50 region and aim to reclaim the key 1.2500 psychological mark.
On the flip side, immediate support is pegged near the 1.2335 horizontal zone, which is closely followed by the 1.2300 round-figure mark. Failure to defend the said support levels might accelerate the slide back towards the 1.2260-50 region. Some follow-through weakness could turn the pair vulnerable to break below the 1.2200 round-figure mark and drop further towards challenging the trend-channel support, around the 1.2160 region.
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