GBP/USD Forecast: Can Brits' buying defy the downbeat global mood? Bulls seem undeterred

• GBP/USD has been benefiting from upbeat UK retail sales but US-China spat is taking their toll.
• The Brexit impasse, rising US coronavirus cases, and further international tensions may bring it down.
• Friday's four-hour chart is painting a favorable picture for bulls.

Put your mask on – that is the message from UK health officials to the public as new regulation comes into force. As Brits' breaths are held back by these coverings, will cable's rise also be capped? Encouraging consumption data may move sterling higher. 

UK Retail Sales jumped by 13.9% in June, beating estimates and sending yearly levels to -1.6%, also exceeding estimates. The upbeat consumption is attributed to the gradual reopening of the economy, deferred expenditure, and also the government's furlough scheme which has kept incomes high. 

Markit's preliminary Purchasing Managers' Indexes for July will likely show ongoing improvement in sentiment as Britain is getting the virus under control. The same cannot be said about the US, where infections topped four million and the number of daily deaths remains above 1,100. Statistics from Florida, California, Texas, and other states will be closely watched.

America's deteriorating disease situation is showing up in the data. Initial jobless claims topped 1.4, million, rising after 15 weeks of declines. The data is for the week of July 17, when Non-Farm Payrolls surveys are held. Markit's preliminary PMIs for July and New Home Sales are out on June are eyed later on Friday.

See US Existing Home Sales Soar: Housing market metrics improve

Sino-American tensions have intensified after China announced the closure of the US consulate in Chengdu – a tit-for-tat response for America's move against the Chinese mission in Houston. Washington hinted that Beijing of using its Texan outpost for spying.

US Secretary of State Mike Pompeo added fuel to the fire with a highly critical speech of China and its president Xi Jinping, calling him authoritarian and tyrant. Nevertheless, Pompeo stressed that the trade deal signed by the world's largest economies early this year remains intact. Overall, the market mood has soured – supporting the safe-haven dollar – but a full-blown sell-off is not on the cards. 

The UK also had its share of friction with China, around London's decision to phase out Hauwei's technology and more recently, the cancelation of the extradition treaty with Hong Kong. Britain acted in response to Beijing's tighter grip on the city-state. 

Closer to home, Brexit is going nowhere fast. Chief EU Negotiator Michel Barnier and David Frost, his counterpart across the channel, acknowledged the lack of progress but clarified that talks will continue. The British press suggested Prime Minister Boris Johnson contemplated abandoning the negotiating table. Investors expect progress only closer to the expiry of the transition period at the end of the year. 

Overall, optimism about the UK economy and local COVID-19 figures is countered by worsening international relations and America's downbeat data. 

GBP/USD Technical Analysis

Pound/dollar has is trading above the 50, 100, and 200 Simple Moving Averages on the four-hour chart, and is setting higher highs and higher lows. Momentum ahs somewhat weakened but remains to the upside. 

All in all, bulls are in control. 

Resistance awaits at the daily high of 1.2773, followed by June's peak of 1.2815. Further above,1.2895 and 1.2980 are eyed.

Support is at 1.2715, which was a stepping soon on the way up. It is followed by 1.2670, a swing low earlier this week, and the former triple top. The next levels are 1.2645 and 1.2610. 

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