The GBP/USD pair opened with a weekly bearish gap, below the 1.3100 handle, following weekend’s Brexit negotiations failure. The talks suffered a setback as the UK and the EU failed to find a compromise and resolve differences over how to avoid the re-emergence of a physical border in Ireland. The pair, however, gradually recovered the lost ground and climbed nearly 100-pips from intraday lows to fill the bearish gap.
In absence of any fresh negative Brexit headlines, some renewed US Dollar selling bias further weighed down by the disappointing release of US monthly retails sales data, turned out to be one of the key factors driving the pair higher. Meanwhile, the positive momentum stalled near 50-hour SMA, with the pair failing ahead of the 1.3200 handle and ending the day nearly unchanged around mid-1.3100s.
With Brexit-related developments turning out to an exclusive driver, market participants now look forward to the UK employment details for some fresh impetus. The key focus will be on the earnings growth data, which is expected to tick lower to 2.8% q/y into August from the previous quarter's 2.9% growth.
Looking at the technical picture, the pair has been showing resilience below 200-hour SMA, albeit now seemed struggling to move back above 50-hour SMA. Hence, it would be prudent to wait for a convincing break through the mentioned range before traders start positioning for the pair's near-term trajectory.
On a sustained break below the mentioned support, currently near the 1.3120 region, leading to a subsequent break through the 1.3100 handle, the pair is likely to accelerate the fall towards 1.3035-30 support area en-route the key 1.30 psychological mark.
Alternatively, a convincing breakthrough 50-hour SMA barrier, near the 1.3160 zone, might now assist the pair to surpass the 1.3200 handle and aim towards testing its next major hurdle near the 1.3235-40 supply zone.
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