GBP/USD dives below 1.2600 as risk appetite wanes
- GBP/USD's rebound from 1.2450 has been capped at 1.2680 area.
- The pound dives to 1.2555, turns negative on the day as risk appetite wanes.
- US dollar appreciates across the board as the US and China report increases of COVID-19 infections.
Sterling’s rebound from Monday’s lows at 1.2454 has been capped at 1.2680/85 on Tuesday and the pair has retreated to session lows below 1.2600. The initial market optimism following a set of bright macroeconomic data and fresh hopes about the Brexit negotiations has faded on renewed concerns about a second wave of COVID-19 infections that has strengthened the safe-haven USD against its main rivals.
Brexit hopes have supported the pound
GBP/USD rallied about 1.7% on Monday and early Tuesday, buoyed by news reporting that the UK and the EU committed to approaching the next meeting with new energy, aiming to avoid an unorderly exit in December. On the macroeconomic front, the resilience shown by the UK labor market, which contained the unemployment level at 3.9% on the three months to April, despite the coronavirus shutdown, has been received with enthusiasm by the market that reacted buying pounds.
The rally, however, was capped below 1.2700 and the pair is pulling back on the US afternoon session. Fears of new coronavirus cases in the US and Beijing’s decision to restrict travel to contain a fresh outbreak have spooked investors.
GBP/USD capped below 1.2680 resistance area
Daily charts show the pair capped below the 200-day SMA, now at 1.2680, which limited the pair’s upside attempts in April and early May. A convincing move above here might target 1.2750/55 (June 8, 11 highs) and finally 1.2815 (June 10 high). On the downside, the pair is trying to find support at 1.2555 (intra-day low), below here, next potential support levels might be 1.2505 (intra-day level) and then June 15 low at 1.2454.
GBP/USD key levels to watch