GBP/USD recedes from three-week top above 1.2400, UK Manufacturing PMI eyed

GBP/USD eases from the highest since May 11 to 1.2386, still positive 0.35% on a day, while heading into the London open on Monday. Although fears of hard Brexit, as well as criticism of the Tory government’s COVID-19 performance, keep looming the Cable traders, the greenback weakness seems to please the buyers ahead of the UK’s first revision of Manufacturing PMI for May.

The US dollar seems to bear the burden of the market’s risk-on sentiment after US President Donald Trump stepped back sanctions on China during Friday’s conference. While portraying the same, the US 10-year Treasury Yields stay positive around 0.654% whereas stocks in Asia-Pacific print mild gains by the press time.

On the other hand, UK Chancellor Rishi Sunak is likely to offer yet another help to the British workers and pre-pone the budget, to July, as per The Sun. Further, the BBC cites the Tory government’s notifications to ease virus-led lockdown measures after managing to cross 200,000 a day target capacity for virus testing by the end of May. As per the news, “From Monday in England primary schools will start to reopen and people can meet in groups of up to six. And vulnerable people in England and Wales will be able to go outdoors for the first time in months.”

Talking about Brexit, the UK and the European Union (EU) both accuses each other to waste the time while being certain of the deadline. However, The Daily Mail said, “Brexit talks cannot go on forever and will need to conclude before the autumn, Britain has warned the EU.”

While Tuesday’s Brexit negotiations between the EU and the British policymakers will be the key, today’s Manufacturing PMIs from the UK and the US will offer intermediate clues. It should also be noted that the US-China tussle is an additional catalyst worth observing. With that in the backdrop, the UK’s Manufacturing PMI for May is likely to remain close to the preliminary figures of 40.6, while likely being at 40.7, but a below 50.00 reading could keep the Cable bulls cautious.

Technical analysis

An upside clearance of the three-month-old resistance line needs to get validation from a 50-day EMA level of 1.2372 to challenge 100-day EMA around 1.2500. Meanwhile, a daily closing below the resistance-turned-support, at 1.2320 now, will highlight a two-week-old support line, at 1.2230.