GBP/USD: Cautious optimism probes bears below 1.3100

GBP/USD seesaws around 1.3080, intraday high of 1.3088, while heading into the London open on Tuesday. Broad US dollar strength, coupled with the coronavirus (COVID-19) challenges to the UK, earlier inverted the Cable’s run-up to the highest since March. Though, increasing odds of a soft Brexit and the Tory government’s further economic push recently stopped the pair’s downside. Given the thin calendar details to watch for Tuesday, market players will have to keep eyes on the key risk factors like Brexit, COIVD-19 and US fiscal stimulus for fresh impulse.

“The UK government has confirmed a £900m funding boost for more than 300 ‘shovel-ready’ projects in England in an effort to speed up construction of homes and infrastructure, said the Financial Times (FT) early in Asia. The news follows earlier updates from Reuters, citing anonymous diplomatic sources, to say that the European Union (EU) is willing to compromise to rescue troubled Brexit talks by softening its demand that Britain heeds EU rules on state aid in the future. Also on the positive side is the UK Express headline indicating plans to introduce 10 freeports after the end of the transition period.

On the contrary, a surge in the UK’s new cases by 938, the highest since June, joins the broad US dollar strength to curb the GBP/USD price moves. Furthermore, chatters surrounding the British government’s warning to the medical suppliers to stockpile and former Tory leader Sir Iain Duncan Smith’s push for reopening the withdrawal agreement also challenged the pair bulls.

Market sentiment remains positive despite US policymakers’ inability to offer any decision on the unemployment claims benefits and the much-awaited fiscal plans. While portraying the same, stocks in Asia-Pacific gains whereas the US stock futures and 10-year Treasury yields await fresh clues to extend Monday’s upbeat performances.

Although the Brexit talks are likely to restart of August 17, updates concerning the UK-US and the Britain-Japan trade negotiations will join pandemic headlines to offer immediate direction to the quote. Additionally, policy deadlock in the US and the vaccine news, coupled with pandemic news, will also be the key to watch for near-term trade direction.

Technical analysis

An ascending trend line from July 20, at 1.3053 now, restricts the pair’s immediate downside ahead of 1.3000 threshold. Alternatively, bulls’ dominance past-1.3200 will have multiple resistances to tackle before attacking the yearly top surrounding 1.3285.