- A broad-based USD selling lifted GBP/USD to fresh one-month tops on Wednesday.
- The bullish momentum seemed rather unaffected by the increasing risk of hard Brexit.
- Wednesday's UK services PMI, US ISM PMI, G7 meeting eyed for a fresh impetus.
The GBP/USD pair continued scaling higher for the fifth consecutive session on Wednesday and cracked through 100-day SMA barrier during the Asian session. Growing optimism about the global economic recovery kept the safe-haven US dollar under pressure and remained supportive of the ongoing momentum to the highest level since late April. The risk-on mood seemed rather unaffected by heightened concerns over US-China tensions and rising social unrest in the United States.
Bullish traders even shrugged off the increasing risk of a hard Brexit ahead of the month-end deadline to extend the transition period beyond this year. In the latest Brexit-related development, the UK dismissed reports that Prime Minister Boris Johnson was ready to compromise on key sticking points such as fisheries and the level playing field. Negotiators kicked off the fourth round of Brexit talks on Tuesday and there has been no hint of any meaningful progress.
The pair held steady below the 1.2600 round-figure mark as traders await any further Brexit-related developments. In the meantime, Wednesday's release of the final UK Services PMI will be looked upon for some impetus. Later during the early North American session, the US macro data might influence the USD price dynamics and produce some meaningful trading opportunities. Wednesday's US economic docket highlights the release of ADP report on private-sector employment and ISM non-manufacturing PMI. Investors might also take cues from headlines coming out of the G7 conference.
Short-term technical outlook
From a technical perspective, acceptance above 100-day SMA for the first time since March might have already set the stage for a further near-term appreciating move. Hence, some follow-through strength towards retesting the very important 200-day SMA, around the 1.2640-50 region, now looks a distinct possibility. A sustained strength above the mentioned barrier will be seen as a fresh trigger for bullish traders and pave the way for an extension of the ongoing upward trajectory.
On the flip side, 100-day SMA, around the 1.2565 region, now seems to act as immediate support, which if broken might prompt some long-unwinding trade. The pair might then accelerate the fall to retest the key 1.2500 psychological mark en-route the next major support near the 1.2440-35 horizontal zone.
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