- UK FinMin Rishi Sunak's generous jobs scheme extended some support to GBP/USD.
- Reviving risk sentiment undermined the safe-haven USD and helped gain traction.
- Investors now await Brexit updates, US data before placing fresh directional bets.
The GBP/USD pair once again showed some resilience below the very important 200-day SMA and staged a modest intraday bounce on Thursday, albeit lacked any strong follow-through. The British pound got a minor lift after the UK finance minister, Rishi Sunak set out his plan to rescue millions of jobs and businesses from a winter crisis amid concerns that resurgence in the coronavirus cases could derail the UK economy.
In an emergency statement to Parliament, Sunak announced a bit more generous Jobs Support Scheme, wherein the government will subsidise the pay of employees who are working fewer than their normal hours due to lower demand. Employers will pay for hours actually worked and the government will cover two-thirds of the lost wages.
On the other hand, growing market worries about the second wave of coronavirus infections, along with the likelihood of the global economic slowdown continued driving some haven flows towards the US dollar. This comes amid risk of a no-deal Brexit, held bulls from placing any aggressive bets and capped the upside for the major.
The USD struggled to preserve its early gains to two-month tops, instead witnessed some profit-taking following the release of the US Initial Weekly Jobless Claims, which rose to 870K as against consensus estimates pointing to a reading of 843K from 866K previous. Adding to this, a late rebound in the US equity markets dented the greenback's safe-haven status and extended some support to the pair.
The market sentiment stabilized a bit amid renewed hopes that the US Congress could break a months-long impasse to agree on the next round of fiscal stimulus measures. Reports indicated that Democrats in the US House of Representatives are working on a $2.2 trillion coronavirus stimulus package. Moreover, the House Speaker Nancy Pelosi could resume stalled stimulus talks with the US Treasury Secretary Steven Mnuchin.
The pair held steady just above mid-1.2700s through the Asian session on Friday, though lacked any strong follow-through as investors await fresh Brexit updates before positioning for the next leg of a directional move. Later during the early North American session, the release of the US Durable Goods Orders data might influence the USD price dynamics and produce some meaningful trading opportunities on the last day of the week.
Short-term technical outlook
From a technical perspective, the pair, so far, has managed to defend an important confluence support – comprising of 200-day SMA and the 38.2% Fibonacci level of the 1.1412-1.3482 positive move. However, the lack of any strong follow-through buying warrants some caution before confirming that the pair might have bottomed out and positioning for any meaningful positive move.
In the meantime, the 1.2800 round-figure mark is likely to act as immediate strong resistance. A sustained move beyond might trigger some short-covering move and push the pair further beyond the 1.2855-60 region, towards reclaiming the 1.2900 mark.
On the flip side, a convincing break below the 1.2685-75 immediate strong support now seems to accelerate the fall to the 1.2625-20 horizontal support en-route the 1.2600 mark. The pair could then extend the downward trajectory further towards mid-1.2500s before eventually dropping to the key 1.2500 psychological mark.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.