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13 Aug 2020

GBP/USD shrugs off recession fears to keep bounce off 1.3000

  • GBP/USD snaps two-day losing streak, capped around 1.3075 off-late.
  • UK GDP confirms recession, business leaders, trade unions urge extension of furlough.
  • Brexit remains gloomy but US cut some UK goods from the tariff list, Britain-Japan trade talks stuck over stilton cheese.
  • US Jobless Claims, risk catalysts in focus amid a light calendar in the UK.

GBP/USD eases from intraday high of 1.3073 to 1.3058 while heading into the London open on Thursday. Even so, the pair keeps its pullback from the previous day’s low of 1.3005. Although no major positives have crossed wires, as far as the UK is concerned, broad US dollar weakness and the quote’s consolidation after two consecutive days of fall could be cited as the reason for the latest recovery. Moving on, traders will be strained to search the catalysts amid a light calendar. Though, US Jobless Claims and talks surrounding stimulus from American and London, as well as the coronavirus (COVID-19) headlines, could entertain the markets.

With over 20% of GDP decline, the UK formally entered into recession the previous day. While the same pushed British business leaders and trade unions towards requesting continuation of furlough scheme beyond October expiry, Chancellor Rishi Sunak sees promising signs off-late.

Talking about trade, Brexit jitters continue with fisheries and level-playing field being the latest hurdle. The negotiators will resume the sixth round in the next week. Elsewhere, the US criticized the European Union (EU) over its inaction concerning the airbus case while adding some French and German goods to the tariff list and removing a few from the UK and Greece. Furthermore, Britain and Japan jostle over the blue cheese in the latest difference following the arguments on automobiles.

On the other hand, US Senators refrain from picking the pace on stimulus talks. Further, some diplomats from the Trump administration and US President Donald Trump criticized China while ordering a showcase of stealth bombers near Vietnam.

Additionally, COVID-19 situations in the US become doubtful amid receding testing whereas the UK managed to reducer over 5,000 death counts after the latest adjustments.

Amid all these plays, the market’s risk-tone remains sluggish with the US 10-year Treasury yields and S&P 500 Futures flashing losses while Japan’s Nikkei 225 taking bids near 23,300.

Traders may now wait for US jobless claims, expected 1120K versus 1186K prior, for fresh impulse while keeping eyes on macros.

Technical analysis

The Cable’s latest bounce ignores bearish MACD signals while aiming for a short-term resistance line near 1.3100 now. Meanwhile, a downside break of 10-day EMA level of 1.3035 won’t call the bears immediately as 21-day EMA and an ascending trend line from June 30, respectively around 1.2935 and 1.2850, can keep the buyers hopeful.

 

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