GBP/USD looks to test 5-DMA support, US-China trade row in focus

Weighed down by US dollar strength amid US tariffs-led risk-aversion
Brexit optimism to keep the pound underpinned, 5-DMA at 1.2842 at risk?

Dhwani Mehta FXStreet

The GBP/USD pair is looking to extend its corrective slide from eleven-day tops of 1.2936, as the US dollar pullback deepens on souring risk-sentiment, in the wake of the new US tariffs on the Chinese imports that kicked-in last minutes.

The greenback reversed a part of the sell-off fuelled by Trump’s Fed criticism and Cohen’s guilty plea, as the FOMC minutes showed that many participants saw another hike likely 'soon'. Further, the US dollar also benefits from the escalating US-China trade tensions, which boosts the safe-haven appeal of the buck.

Meanwhile, on the GBP-side of the equation, the renewed Brexit optimism could offer some support to the GBP bulls after the EU Chief Brexit Negotiator Barnier and UK Brexit Secretary Raab agreed to hold non-stop Brexit negotiations and pledged to reach a deal.

However, it remains to be seen if the spot manages to contain the downside, as the US dollar price-action is expected to remain the exclusive driver ahead of the UK CBI realized sales and US datasets.

GBP/USD Technical Levels

FXStreet’s Chief Analyst, Valeria Bednarik, notes: “On Thursday, the UK will see the release of the CBI realized sales survey, foreseen at 13% from the previous 20%. In the meantime, the pair seems to have entered a short-term consolidative phase above the 1.2900 figure, maintaining a positive tone, as, in the 4 hours chart, the price remains well above a bullish 20 SMA, while technical indicators barely eased within overbought readings. The positive momentum should fade on a break below 1.2865, a strong static support and the daily low. Support levels: 1.2865 1.2820 1.2770. Resistance levels: 1.2935 1.2960 1.2995.”

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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