Credit: REUTERS/THOMAS WHITEJuly 27 - GBP/USD climbed 1.8% last week, as the USD fell on a cocktail of factors. U.S.-China trade tensions , the expanding coronavirus , conflicting Republican and Democrat expectations on a stimulus package , and uncertainty surrounding the November election all weighed. The reaction to negative news during the coronavirus pandemic has been to buy the USD as a safe haven. The key for cable this week is whether USD weakness on bad news will continue.
Despite some upbeat UK data, there is little domestic reason for sustained sterling strength. PMI and retail sales bounced from low levels , while UK firms were more confident, but consumers remain cautious . PM Johnson is wary of a second coronavirus wave, but does not expect a V shaped recovery , and Brexit talks remain at an impasse .
Technical signs are positive for cable. Daily momentum studies, 5, 10 & 21 daily and weekly moving averages head north, while last week's sustained break of the 1.2703 200 daily moving average was a strong positive. The 1.2812 June high is currently under pressure with a break targeting 1.3020, 76.4% 2019/2020 fall. A close below 1.2584, 21 daily moving average, which was a recent base, would be needed to undermine topside bias on the charts.
gbp jul 27https://tmsnrt.rs/3g3BnhO
(Andrew Spencer is a Reuters market analyst. The views expressed are his own)
((Andrew.m.spencer@thomsonreuters.com))
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