GBP/USD trades flat near 1.3270 as risk-off balances out USD weakness
- Risk aversion dominates the markets on Monday.
- US Dollar Index consolidates near 10-day lows.
- Brexit uncertainty continues to weigh on GBP.
The GBP/USD pair failed to preserve the bullish momentum that it build up following the BoE's hawkish surprise last week and failed to rise above the 1.33 mark. After encountering a technical resistance at 1.3290, the pair has gone into a consolidation phase as it struggled to take advantage of the USD weakness in the risk-off environment. At the moment, the pair is trading at 1.3266, virtually unchanged on the day.
Today's data from the United States showed that the National Activity Index released by the Federal Reserve Bank of Chicago slumped to -0.15 in May, pointing out to a slowdown in the economic activity. On the other hand, Dallas Fed Manufacturing Business Index improved to 36.5 in June from 26.8 in May.
Meanwhile, following a Wall Street Journal report that claimed the United States was planning to block technology exports to China and the Treasury Department was drafting a plan to prevent companies with 25% Chinese ownership to buy technology firms in the U.S., concerns over a long-lasting trade dispute with China forced investors to move away from risk carrying assets. Both the Dow Jones Industrial Average and the S&P 500 indexes are losing more than 1.5%.
On the other hand, earlier in the day the UK PM Theresa May's Spokeswoman reiterated that the government was confident about reaching a Brexit deal with the EU and added that the deal would be supported by employers.
Technical outlook
Despite the recovery witnessed last week, the RSI indicator on the daily chart continues to stay below the 50 mark, suggesting that buyers haven't shown a strong commitment yet. On the upside, 1.3300/1.3310 (psychological level/20-DMA/Jun. 22 high) could be seen as the first technical resistance ahead of 1.3410 (50-DMA) and 1.3500 (psychological level). Technical supports align at 1.3220 (daily low), 1.3150 (Jun. 19 low) and 1.3100 (psychological level/Jun. 21 low).