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GBP/USD: Sellers catch a breath near 2-week low, all eyes on UK Services PMI

  • GBP/USD retraces latest declines amid lack of fresh clues from the UK.
  • Risk-off continues to weigh on the US Dollar (USD).
  • Trade/political headlines, British Services PMI and second-tier data from the US act as the key catalysts to follow.
While sluggish data and dovish comments from the BOE Governor dragged the GBP/USD pair down during the initial week, sellers seem resting around 1.2590, on the back of overall US Dollar (USD) decline and a lack of fresh headlines from the UK, ahead of the London open on Wednesday.

Britain’s headline purchasing managers’ index (PMI) data continue flashing red signals to the policymakers, which in turn might have pushed the Bank of England (BOE) Governor Mark Carney to convey downside risks on the economy during Tuesday. The central bank Governor also cited trade protectionism as the key negatives for the markets.

Although the UK Prime Minister (PM) hopeful Boris Johnson’s support for no-deal Brexit is no hidden fact, the BBC reported both the candidates, namely Mr. Johnson and Jeremy Hunt, trying to lure Northern Ireland voters over soft Brexit and no hard border during their hustings the previous day. The news report also mentions the hopefuls selling themselves over the ability to get a fresh deal from the EU.

On a broader front, latest headlines concerning the US trade relations with the EU and China haven’t been positive to market sentiment and have been weighing over the greenback.

Traders’ immediate focus will be on the UK Services PMI data for June followed by ADP Employment Change, ISM Non-Manufacturing PMI, Factory Orders, and Trade Balance numbers from the US. Meanwhile, the political/trade headlines can keep offering intermediate market moves.

The British Services PMI for June isn’t expected to deviate from 51.00 but expected weakness into the US ISM Non-Manufacturing PMI, Factory Orders, and Trade Balance could keep exerting downside pressure onto the USD. It should also be noted that the leading indicator to Friday’s US Nonfarm Employment Change (NFP), the ADP data, bears the upbeat consensus of marking 140K increase versus 27K previous readouts.

Technical Analysis

The 1.2566/60 area comprising May month low and June 18 top could challenge the GBP/USD sellers amid close to oversold levels of 14-day relative strength index (RSI), which if ignored might drag the quote to June month bottom around 1.2506.

Meanwhile, 1.2630/35 and 1.2660/65 act as near-term key resistances ahead of highlighting 50-day exponential moving average (50-D EMA) level of 1.2756 for buyers.