GBP/USD retreats from highs, continues to float above 1.30

  • Michel Barnier's comments ease worries over no-deal Brexit.
  • The UK economy expands more than expected in July.
  • US Dollar Index looks to close the day modestly lower. 

The GBP/USD pair struggled to fins direction following the mixed macroeconomic data releases from the UK during the first half of the day but gained traction during the early trading hours of the NA session to advance to its highest level in five weeks above the 1.30 mark. With the trading volume thinning out toward the end of the day, the pair eased from its highs and was last seen trading at 1.3030, where it was still up 0.9% on the day.

The EU's Chief Brexit Negotiator, Michel Barnier, said that it was possible to reach a Brexit deal in 6 to 8 weeks and added that the Chequers plan was useful for them. Boosted by these remarks, the GBP gathered strength against its major rivals and the GBP/USD pair added more than 100 pips while the EUR/GBP lost over 50 pips.

Earlier in the day, the data released by the National Statistics revealed that the UK economy expanded by 0.3% in July to surpass the market expectation of 0.2%. On a negative note, both the industrial and manufacturing production figures fell short of the market consensus while the trade balance shrunk by more than forecasted.

On the other hand, the only data from the U.S. on Monday showed that the total amount of consumer credit rose to $16.64 billion in July from $8.46 billion in June. The US Dollar Index, which tested the 95 mark when the GBP/USD surged sharply, staged a modest recovery late in the day and was down 0.2% at 95.15 as of writing.

Technical levels to consider

The next technical resistance for the pair could be seen at 1.3125 (100-DMA) followed by 1.32 (psychological level) and 1.3270 (Jul. 17 high). On the downside, supports align at 1.3000 (psychological level), 1.2955 (50-DMA) and 1.2900 (20-DMA/daily low).

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