The GBPUSD pair, currently trading at 1.26821, is finding it difficult to maintain its first daily increase in four days, as it hovers near its lowest level in a week.

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• GBP/USD struggles to defend the first daily gains in four at the lowest level in a week.

The pair currently trades last at 1.26821.

The previous day high was 1.2819 while the previous day low was 1.267. The daily 38.2% Fib levels comes at 1.2727, expected to provide resistance. Similarly, the daily 61.8% fib level is at 1.2762, expected to provide resistance.

GBP/USD stays defensive beyond an 11-week-old rising support line, making rounds to 1.2680-90 heading into Friday’s London open. In doing so, the Cable pair justifies the market’s cautious mood of the first readings of the UK’s second quarter (Q2) Gross Domestic Product (GDP), expected 0.0% QoQ versus 0.1% prior, especially amid fears of British recession. However, the US Dollar’s retreat prods the Pound Sterling sellers of late.

That said, the US Dollar Index (DXY) fails to extend the late Thursday’s rebound from the lowest level in a week as a slew of policymakers from the Federal Reserve (Fed) conveyed the US central bank’s hard-earned victory on inflation. Even so, their tones appeared less convincing for doves and joined the risk-negative concerns about China to limit the Greenback’s fall and test the Cable buyers.

Among them, Philadelphia Federal Reserve Bank President Patrick Harker raised a toast to the Fed’s progress in its fight against inflation and was joined by Boston Federal Reserve President Susan Collins and Atlanta Federal Reserve Bank President Raphael Bostic to cheer the softer US CPI. However, San Francisco Fed President Daly turned down the cheers for their victory while saying, “There’s still more work to do.”

On a different page, China allows the local governments to use the provincial-level governments to raise about 1 trillion yuan ($139 billion) via bond sales to repay the debt of local-government financing vehicles (LGFV) and other off-balance sheet issuers, per Bloomberg. The news justifies the market’s confidence in the Chinese policymakers’ capacity to avoid recession and weigh on the US Dollar, via slightly positive market mood.

It should be noted that the fears of witnessing more geopolitical tussles between the West and China, mainly due to the US restriction on investment in China technology companies and the likely repeat of the measures by the UK and European Union, weighed on the sentiment.

Further, the chatters about slower economic growth in top-tier economies and recession woes in China, Germany and the UK pushed back the US Dollar bears as well. Furthermore, the news that China’s leading realtor Country Garden braces for debt restructuring and the anxiety ahead of more US data also prod the optimists.

Earlier in the week, the UK’s leading thinktank National Institute of Economic and Social Research (NIESR) said, per The Guardian, that it would take until the third quarter (Q3) of 2024 for British output to return to its pre-pandemic peak.

Also to observe is the fact that the political struggle of the Tory party and the fears of higher inflation, coupled with the employment crunch and slower economic transition, also challenges the GBP/USD rebound ahead of the UK Q2 GDP.

Also read: UK Q2 Gross Domestic Product Preview: British economy forecast to stagnate despite BoE optimism

Apart from the UK GDP, the US Producer Price Index (PPI) for July, the preliminary readings of the University of Michigan’s (UoM) Consumer Sentiment Index (CSI) for August and the UoM 5-Year Consumer Inflation Expectations for the said month will also be important to watch for clear directions of the GBP/USD pair.

A three-week-old bearish trend channel restricts immediate GBP/USD moves between 1.2570 and 1.2790. Adding credence to the downside bias are the bearish MACD signals and downbeat concerns about the UK GDP.

That said, the Daily chart fine-tunes the moves by suggesting a sustained trading beyond the rising support line from late May, around 1.2655 by the press time.

Technical Levels: Supports and Resistances

GBPUSD currently trading at 1.2684 at the time of writing. Pair opened at 1.2676 and is trading with a change of 0.06% % .

The pair is trading below its 20 Daily moving average @ 1.2844, below its 50 Daily moving average @ 1.276 , above its 100 Daily moving average @ 1.2604 and above its 200 Daily moving average @ 1.2344

The previous day high was 1.2819 while the previous day low was 1.267. The daily 38.2% Fib levels comes at 1.2727, expected to provide resistance. Similarly, the daily 61.8% fib level is at 1.2762, expected to provide resistance.

Note the levels of interest below:

• Pivot support is noted at 1.2624, 1.2573, 1.2475
• Pivot resistance is noted at 1.2773, 1.2871, 1.2922

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