GBP/USD steady above 1.2550 remains close to 1.2645 multi-month highs

Sterling’s reversal from 5-week highs at 1.2610 has been contained at 1.2550 and the pair remains steady, with the 2, ½-month highs, at 1.2645 on sight. The cable is on its way to a 2.6% appreciation following a five-day rally, buoyed by a risk-on market that is weighing on the US dollar.

US dollar drops amid global recovery hopes

The GBP/USD continues advancing on a solid pace as the US dollar loses ground against its main peers. The recent measures to re-open of the major economies are boosting confidence on global recovery in the second half of the year, a sentiment that has been driving investors towards riskier assets.

Furthermore, US macroeconomic data, with ADP employment figures showing a substantial decline on employment loss in May and the better than expected ISM non-manufacturing activity have contributed to keeping the positive sentiment, in detriment of safe-havens like the US dollar.

Pound bulls, however, remain weighed by looming Brexit risks. With the trade negotiations at a deadlock, the Bank of England has warned the City to prepare for a no-deal exit from the Union, which is offsetting pound strength.

GBP/USD: resistance at 1.2645 will cap pound’s rally – Yohay Elam

FXStreet’s analyst Yohay Elam observes the pound entering overbought territory, unlikely to advance beyond the 1.2645 level: “The Relative Strength Index on the 4-hour chart is above 70, pointing to overbought conditions and potential downfall. Cable has been approaching the critical 1.2645 level, a double top recorded in April. Reaching it and crossing it seems unlikely in the short-term.”