GBP/USD: Bears attack 1.2400 as USD strength offsets Brexit optimism

GBP/USD drops to 1.2404, down 0.10% on a day, while heading into the London open on Thursday. The Cable pair fails to cheer the recent Brexit-positive signs amid the broad greenback strength backed by risk-off sentiment. Though, a light calendar before the US session pushes traders to search for fresh clues concerning the coronavirus (COVID-19) and trade wars for near-term direction.

The Financial Times headline suggesting Brussels’ step-back on the “level playing field” recently offered positive signs before the EU-UK policymakers meet for Brexit talks during the early-July. Additionally, the UK Express also mentions, relying on the former British MEP Andrew Kerr’s comments, that the European Union (EU) is afraid of being left "fighting for its survival" if the UK secures a strong trade deal at the end of the Brexit transition. Elsewhere, the City AM quotes EU’s chief negotiator Michel Barnier to say that Britain can still achieve a post-Brexit trade deal with the European Union as long as the UK stops “backtracking” on its commitments.

Other than the Brexit optimism, global praise of the UK’s COVID-19 combat, vaccine test and easing of the lockdown restrictions are some extra positives favoring the pound pair. Furthermore, no deadline for the UK-US trade deal talks makes it more lucrative versus Japan’s six-week time limit.

Alternatively, the US threats to levy tariffs on the EU/UK goods join the surge in the American virus numbers weigh on the pair and market sentiment. As a result, the US 10-year treasury yields and stock futures extend the previous day’s losses whereas Asian indices also slump despite off at China.

Market watchers may now keep eyes on the UK’s reaction to the bloc’s step forward as well as the trade-negative signals from the US to determine immediate pair moves. Also important will be the US pandemic updates and latest data concerning the Jobless Claims and Durable Goods Orders.

Technical analysis

Failures to cross a three-month-old support-turned-resistance line, currently around 1.2530/35, drags GBP/USD to an ascending trend line since May 18, at 1.2365 now.