GBP/USD: Bulls attack 1.2500 ahead of Brexit talks in London

GBP/USD becomes another major currency pair to benefit from the US dollar weakness while rising to 1.2490 during the pre-London open on Monday. In doing so, the Cable registers 0.08% gain and stretches Friday’s gains to challenge the monthly top beyond 1.2500. However, the quote is yet to confirm a bullish chart formation before the key Brexit talks in London.

Having witnessed an abrupt end to the Brexit negotiations during the last week, diplomats from the European Union (EU) are to meet their British counterparts in London for the second of the six-week talks. Ahead of the negotiations, the Brexit Party Chairman Richard Tice has already pulled the trigger with a warning to the EU fisheries. Also dimming the hopes of any fruitful results is the Financial Times news that suggests the UK missed a deadline that could result in freezing of funds. “The risk of UK funds being frozen out of the European market at the end of the year has risen after Brexit negotiators missed a key milestone aimed at securing market access for the City of London,” said the news. Further, the bloc’s refrain from standing down as far as the “level playing field” is concerned also could offer a blow to the negotiation re-start.

Other than the departure talks, the pair traders will also search for the clues as to how the British Chancellor Rishi Sunak will use his Wednesday’s plan to combat the economic pessimism triggered through the coronavirus (COVID-19). Market forecasts suggest that the Tory member might come out with creative ways, like vouchers to adults and children, to infuse further liquidity into the key economic sectors.

Elsewhere, the UK’s reopening of pubs and bars from Saturday got huge criticism after people ignored social distancing rules. As a result, fears of another round of the pandemic can’t be ignored.

On a different note, the Bank of England Governor Andrew Bailey warned over the negative interest rates during the weekend. The news suggests that the Old Lady is up for another stimulus but in a positive way.

Amid all these catalysts, the GBP/USD pair chose to cheer the greenback weakness amid mildly upbeat trading sentiment. The US 10-year Treasury yields and stock futures seem to ignore the rising virus numbers from the world’s largest economy while stocks in Asia track surge in Chinese blue-chips amid hopes of further aides by the central bank and/or government.

Looking forward, the second reading of the UK’s Construction PMI for June, expected 47 versus 28.9 prior, could offer additional strength to the quote. However, major attention will be given to the Brexit talks. Additionally, the US traders’ return after Friday’s Independence Day holiday as well as the US ISM Non-Manufacturing PMI, expected 49.5 versus 45.4, will be the key to watch.

Technical analysis

Inverse Head-And-Shoulder formation on the four-hour chart keeps the bulls hopeful. However, the neckline of the bullish pattern and 50% Fibonacci retracement level of June 10-29 fall highlight 1.2535 as the key resistance. Alternatively, a downside break below 200-bar SMA level of 1.2458 can recall 1.2400 round-figure on the chart.