GBP/USD renews monthly top above 1.3900 on softer USD, Brexit optimism

• GBP/USD picks up bids to refresh multi-day high during four-day uptrend.
• US dollar tracks Treasury yields to the south despite Fed’s dovish tilt.
• EU softens legal threat over NI protocol on demand of UK’s Frost.
• UK scraps quarantine rules for fully vaccinated EU, US travelers.

GBP/USD bulls poke late June’s tops, up 0.15% intraday around 1.3925, heading into Thursday’s London open. In doing so, the cable pair rises for the fourth consecutive day amid mildly positive headlines concerning Brexit and covid from the UK, as well as broad US dollar weakness.

Britain’s covid infections drop for the seventh consecutive day to 23,511 on Tuesday, helping UK PM Boris Johnson to say, per Reuters, "We want people to be able to come from the US freely in a way that they normally do. We're talking to them the whole time.” The British move seems to pay a little heed to the highest death toll since March.

Elsewhere, New South Wales (NSW) conveyed 239 new cases for the 24 hours ending on July 28, the highest figures in 16 months, fueling the national number to the August 2020 levels. Further, Delta covid variant pushes Twitter to shut down offices in San Francisco and New York.

It’s worth noting that the European Union’s (EU) softening of stand over legal threat if the UK alters the Northern Ireland (NI) protocol also favors the GBP/USD upside as the move was demanded by UK Brexit Minister David Frost to negotiate the protocol with the bloc. “The delay in legal action, confirmed by an EU spokesperson, comes after EU ambassadors were told last week that the bloc was planning to file a so-called reasoned opinion by the end of the month,” said Bloomberg.

Also contributing to the GBP/USD upside could be the US dollar’s declines during the post-Federal Open Market Committee (FOMC) announcements. The US Dollar Index (DXY) drops for the fourth consecutive day, to the lowest in 12 days, as the Fed refrains from tapering. Additionally, optimism surrounding US President Joe Biden’s infrastructure spending bill also weighs on the greenback as Senators backed the initial debate during Wednesday’s voting.

Looking forward, Brexit and covid updates remain the key for GBP/USD traders as recently optimism bode well for the bulls. However, today’s first reading of the US Q2 GDP, expected 8.6% annualized versus 6.4% prior, should also be closely observed for fresh impulse.

Technical analysis

Bullish MACD and firm RSI enable GBP/USD to battle 100-DMA near 1.3925-30, a break of which could escalate the run-up towards a five-month-old horizontal resistance around 1.4000–4010 area. Meanwhile, the previous resistance line from June 23, surrounding 1.3840 restricts the short-term downside of the pair.