- GBP/USD staged a modest intraday recovery of around 50-60 pips from two-month lows.
- Concerns about rising COVID-19 cases continued underpinning the USD and capped gains.
- Investors now wait for fresh Brexit updates before placing any aggressive directional bets.
The GBP/USD pair struggled to capitalize on its goodish intraday rebound from two-month lows and was last seen trading in the neutral territory, around the 1.2735-40 region.
The pair showed some resilience below the very important 200-day SMA and for now, seems to have stalled its recent rejection slide from the key 1.3000 psychological mark. The pair staged a modest recovery from the daily swing lows to the 1.2675 region in reaction to comments by the EU's chief Brexit negotiator, Michel Barnier, saying that we remain determined to strike a Brexit deal.
It is worth reporting that Barnier will be in London for informal Brexit talks until Friday. Hence, the incoming Brexit-related headlines will continue to influence the sentiment surrounding the sterling. Meanwhile, a weaker than expected UK Services PMI, coupled with fears about a second lockdown in the UK kept a lid on any runaway rally for the GBP/USD pair, at least for now.
On the other hand, the US dollar remained well supported by concerns about weakening global economic momentum amid the ever-increasing coronavirus cases. Adding to this, the Chicago Fed President, Charles Evans struck a hawkish tone on Tuesday and argued that the Fed may still raise interest rates before the consumer price index reaches 2%, which provided an additional boost to the greenback.
The key USD Index jumped to a two-month high, albeit the prevalent risk-on mood – as depicted by a strong positive move in the equity markets – prompted some profit-taking. This, in turn, should act as the only factor that might help limit any meaningful slide for the GBP/USD pair. Hence, it will be prudent to wait for some follow-through selling before positioning for any further depreciating move.
Moving ahead, market participants now look forward to the release of the flash version of the US Manufacturing and Services PMI. This, along with the second day of Congressional testimony by the Fed Chair Jerome Powell will influence the USD price dynamics and produce some short-term trading opportunities later during the North American session.
Technical levels to watch
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