GBP/USD Analysis: Daily Moving Average Remains Tough

The GBP/USD currency pair is trading sluggishly under 1.2000. This is in spite of its recent recovery from 1.1960. The US Dollar is currently consolidating after an average rebound from a two-week low level.

British Leader Contest

The markets are still dealing with a risk-off sentiment in the midst of recession concerns. Whereas, leadership tussle is keeping the Pound bulls on a defensive line. 

A PM candidate, Liz Truss, has set out her investment agenda if she becomes PM. While another, Rishi Sunak, plans to put the government on a crisis alert immediately.

However, buyers are attracting more support from increasing expectations of the BOE August rate increase. The BOE is expected to increase interest rates by up to 50 basis points. This is specifically following the S&P Preliminary Service and Manufacturing PM Index for July.

GBP/USD price chart. Source TradingView

This week’s focus will, nevertheless, remain on the Federal Reserve’s rate increase decision. While that is in the pipeline, traders will watch out for political development in the UK. They will also watch out for the Durable Goods Order report in the US for new trading momentum.

Prospects and Effects of Recovery

The bearish 21-period daily moving average of 1.2006 gives a strong resistance. It, however, recalled sellers on Monday. It requires a daily closing over the 1.2006 line to confirm the bullish reversal.

The development will make it possible to have a new recovery in the direction of Friday’s high level of 1.2064. Bulls will then look forward to 1.2100 after 1.2064 has been achieved.

The relative strength index on the 14-day scale is getting lower while it’s beneath the midline. This suggests that bears might still remain in control.

The closest line of support is now at the 1.1950 area. Under it, the low level of Friday at 1.1915 will be tested again. The Pound’s buyers’ final line of support is pegged at 1.1900, which is the critical demand area.

On the one hand, the US data expects to have a bumpy ride. There are reports of soft earnings by Wall Street on a general note. 

Note that Ford is planning to lay off about 8,000 employees. While Google, on the other hand, has paused its hiring process. This might result in a slide in employment and the general labor market.