The GBP/USD pair is trading near the 1.2700 price level and appears to be struggling to find a clear direction. The British Pound/US Dollar pair is trapped with recession fears and the recent US-China rivalry. As a result of this, the flight towards safe assets such as US Dollar seems to be the obvious choice.
Looking ahead, the independence day holiday in the USA will keep most of the traders on the sidelines as they wait for fresh impetus from the US and the UK markets.
The technical outlook of GBP/USD also paints a very interesting picture, as the 50 SMA and the 23.6% fib retracement is present at 1.2700. In addition, the 100 SMA also aligns with a major resistance on the GBP/USD chart. If this level is crossed, the pair will move towards the 1.2750 and the 1.2800 levels.
GBP/USD - The 1.2650 Support Remains Integral
On the flip side, the nearest support is 1.2650, which also coincides with the 20 SMA. After that, the next support for the GBP/USD is the 1.2600 level, followed by 1.2570.
For the most part, the Pound/Dollar pair is trading in a tight channel during the Asian & European sessions. The only reason for limited losses in this pair is the improved risk sentiment for the related currencies. But once the PMI report is released, we may see some movement in the GBP/USD.
On Friday, the US Dollar came under selling pressure which paved the way for a rebound in the Pound/Dollar pair. The data from the USA showed a decline in the PCE index during May which pushed the US Dollar index to lose 0.5%.
But despite the recent economic release, the USD is showing resilience against other currencies as there's a high chance of a 25 bps rate hike during July.
However, any rate hike news from the BoE may also strengthen the GBP which would make things interesting for the GBP/USD pair.