- GBP/USD advanced to 1.2700 and erased daily gains.
- UK jobs report and inflation data this week could trigger big action in the pair.
- A bullish opening in Wall Street could weigh on the USD later in the day.
GBP/USD edged lower in the Asian session on Monday but managed to recover to the 1.2700 in the European morning. Investors could refrain from taking large positions ahead of the UK labor market and inflation data due for release on Tuesday and Wednesday, respectively.
The negative shift witnessed in risk sentiment on concerning developments in China’s property sector allowed the US Dollar (USD) to find demand as a safe haven. The USD Index climbed to its highest level in over a month near 103.00 at the beginning of the week and GBP/USD turned south.
Nevertheless, US stock index futures turned positive on the day in the early European session and made it difficult for the USD to preserve its strength.
In case Wall Street’s main indexes open in the green and continue to push higher, the USD could stay on the back foot in the second half of the day. The pair’s recovery, however, could remain limited ahead of UK data. The US economic docket will not feature any high-tier data releases on Monday.
GBP/USD Technical Analysis
GBP/USD was last seen trading near the upper limit of the descending channel coming from mid-July. Meanwhile, the Relative Strength Index (RSI) indicator on the four-hour chart edged higher to 50, reflecting the lack of seller interest in the near term.
If GBP/USD stabilizes above 1.2700 (20-period Simple Moving Average (SMA), upper limit of the descending channel) and confirms that level as support, 1.2730 (50-period SMA, static level) could be seen as interim resistance ahead of 1.2800 (100-period SMA, static level, psychological level).
Looking south, static support aligns at 1.2675 ahead of 1.2650 (mid-point of the descending channel, static level). A four-hour close above the latter could bring in additional sellers and open the door for an extended slide toward 1.2600 (psychological level, lower limit of the descending channel).