GBP/USD: Defensive above 1.3800, UK PM Johnson’s plan for final unlock eyed

GBP/USD remains sidelined, mildly offered, around 1.3820-25 heading into Monday’s London open. The cable bounced off the lowest since mid-April the previous day on broad US dollar weakness before recently turning cautious ahead of UK PM Boris Johnson’s key speech. Also weighing on the quote could be the Brexit headlines and an extended holiday in the US.

UK Housing Secretary Robert Jenrick cited the monthly covid data as “very positive” while saying, per Reuters, “The wearing of face coverings in England will become a personal choice and the data that will determine if lockdown restrictions can be lifted this month.” To mention the coronavirus (COVID-19) numbers, The Sun said, “Coronavirus cases rise to 24,248 with 15 more deaths” while also marking a 161% jump in the daily count versus receding virus-led death toll. It’s worth noting that the UK earlier pushed back the unlock deadline to July 19, Freedom Day, citing concerns over the Delta covid variant.

Elsewhere, Brexit jitters renew after the new leader of the Democratic Unionist Party (DUP) said, in his first interview since taking office, per The Telegraph, “The Brexit protocol has damaged Northern Ireland's relationship with Great Britain.” On the same front, Brexit minister Lord David Frost told the Sunday Telegraph that the three-month truce in the so-called sausage wars between the UK and EU only amounts to a “sticking plaster”.

On the other hand, market sentiment pares Friday’s risk-on mood, backed by the mixed US jobs report for June, amid an off in American and a light calendar in Asia. That said, S&P 500 Futures drop 0.15% intraday by the press time.

Moving on, an extended holiday in the US and the key speech from UK PM Johnson highlights GBP/USD for the day. Although Boris may not risk stepping back from easing the mask mandate, any negative surprises can’t be ruled out considering the Delta variant. Also important will be the final reading of June’s UK Services PMI, expected to confirm the preliminary prints of 61.7.

Technical analysis

GBP/USD grinds inside monthly falling wedge bullish chart formation amid sluggish Momentum line and failures to extend the bounce off multi-day low. Though, any further downside will be tested by the stated bullish formation’s support line, around 1.3730. Alternatively, an upside break of the 1.3845 resistance line will confirm the bullish chart pattern with an initial rise targeting late June’s top of the 1.4000 threshold.