GBPUSD trades slightly higher n a mute day as the markets in the UK are closed for holidays. USD dollar is under pressure today as the risk-on sentiment improves despite the escalation in US-China tensions.
GBPUSD lost momentum after the at 1.2650 mark which halted the rebound from the March lows that hit after the coronavirus sell-off.
The British pound was under selling pressure the last three weeks as traders bet in negative interest rates in UK for the first time ever. Bank of England governor Andrew Bailey rejected the negative interest rates scenario since it would cause many problems to the banking sector. However, the money markets point to negative rates as the gilt yields for up to five-year maturities are trading below zero.
Meanwhile, Brexit uncertainties and a slower exit from the coronavirus lockdown will continue to weigh on the pair. The UK administration continues to rule out an extension to the transition period, and a free-trade agreement might be complicated to finalise before the end of the year. With that in mind, the British pound may weaken to reflect greater trade and investment risks.
GBPUSD is 0.26% higher at 1.2196, reversing three consecutive days of losses. The technical picture has deteriorated, and bears are in full control of the pair pointing to further correction that could test the 1.20 mark.
On the upside, the initial resistance for GBPUSD stands at 1.2203 the daily top. The next obstacle would be met at 1.2236 the high from May 22 trading session. A successful break above 1.2236 is likely to open the way for a move higher to the next resistance at 1.2271 the 50-day moving average.
On the other hand, immediate support stands at 1.2164 the daily low. If the pair breaks below the 1.2164 support level, the GBPUSD price could correct lower towards 1.2085 the low from May 18. If the GBPUSD pair continues lower, the next support zone would be met at 1.1780 the low from March 26 trading session.