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The GBP/USD exchange rate is quoted at 1.2309 ahead of the weekend, with analyst and technical forecaster Richard Perry of Hantec Markets saying the pair is looking increasingly constructive, even if only because of Dollar weakness.
The broad dollar weakness is really helping GBP/USD bulls at the moment, so much so that there is a renewed prospect of continued recovery. In the past couple of weeks, the market has been starting to pick up.
Support at $1.2075 seems to now have a higher low at $1.2160 and a mini uptrend recovery is holding. With now three confirmed consecutive higher daily lows (and the prospect of a fourth now today) the market is pressuring recent resistance at $1.2360.
Whilst as yet there is still no confirmation of the recovery being the dominant trend, a breakout above $1.2360 would then open a test of resistance at $1.2465 which is the first real lower high.
If $1.2465 can be breached then there would be a decisive change in the outlook. For now, this is still a developing near term recovery which is unwinding the market from the key break below $1.2160. of mid-May.
All the while, momentum indicators continue to pick up, with RSI into the 50s. However, the last two rebounds (from April) have seen RSI flounder at 59 before selling pressure took hold once more.
This rally continues, but must be treated with caution until these conditions have seen positive breaks. The mini uptrend comes in at $1.2220 today. A close above $1.2360 would continue the rebound.
Markets Close out May Lower Amidst Heightened Geopolitical Tensions
For the past few days, markets have been building with anticipation of an impending escalation of tensions between the US and China.
Whilst equity markets have been positive with focus on COVID-19 vaccines and economy re-openings, looking large overhead has been the US response to China over its treatment of Hong Kong.
Tension is being cranked up today as President Trump is set to hold a press conference to announce the US response to China imposing its will over Hong Kong with a security bill.
If he announces the intention for punitive sanctions on China and the status of Hong Kong, then it could really hit risk appetite. Market sentiment has taken a hit overnight in anticipation.
Equities fell back into the close on Wall Street and futures are pointing lower this morning.
Safe haven asset plays are benefitting, with US Treasury yields lower, the Japanese yen outperforming major currencies, and a rebound continuing on gold. What is interesting in all this is that the dollar is suffering amidst this move. Historically, where US/China tensions flare up, the dollar has been strong.
For now, this does not seem to be the case. We see that the risk rally that had held such positive momentum earlier in the week is hitting the buffers today and markets are on a knife edge ahead of Trump’s press conference.
Furthermore, overnight Japanese data for April on retail sales and industrial production coming in worse than expected has played into a more cautious outlook across major markets, although May’s Japanese consumer confidence did come in slightly ahead of forecast.