GBP/USD recovering from early risk slump

Markets are keeping one foot in safe havens as the US launches another volley of China tariffs.
With the UK calendar empty until Wednesday, Brexit is the meaningful data point for traders this week.

Joshua Gibson FXStreet

The GBP/USD is popping into 1.3160 ahead of London's market open for Tuesday after further tariffs in the US-China trade war are set to come into effect on September 24th.

Market sentiment took a step lower in Tuesday's early trading after the US announced $200 billion in tariffs against China, and broader risk sentiment has struck a cautious tone as traders brace for reactions from China.

Tuesday marks the second day in a row of little UK economic data on the calendar, and traders are looking towards Wednesday's CPI reading at 08:30 GMT, where markets are forecasting a tick lower from 1.9% to 1.8% for the y/y figure into August.

Brexit continues to be the headliner of note for the GBP markets; hardline Brexiteers within the UK's own government are promising to automatically vote down any deal that Prime Minister May reaches with the EU, just as Michel Barnier, the EU's lead Brexit negotiator, finally looks set to begin working on making a workable agreement with PM May.

GBP/USD levels to watch

The Sterling is leaning into the bullish camp, buoyed by Brexit hopes, and as FXStreet's own Valeria Bednarik noted, "the GBP/USD pair broke above its previous 6-week high but held a few pips below the 1.3170 resistance, the 50% retracement of the 2016/18 rally. The 4 hours chart shows that a bullish 20 SMA continues providing intraday dynamic support, currently at 1.3090, also that the RSI indicator lost directional strength after reaching overbought levels, and that the Momentum turns lower, rather indicating pausing buying interest than an upcoming decline, as the price remains at daily highs. Large stops are suspected above the mentioned long-term Fibonacci resistance and could result in a steeper advance if they got triggered. 1.3212, July 26th daily high, is the next possible bullish target."

Support levels: 1.3125 1.3090 1.3045

Resistance levels: 1.3170 1.3210 1.3240

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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