- GBP/USD bulls are yielding into bearish control below 1.2000.
- UK political jitters and recession fears weigh down on the spot.
- The US dollar holds the bounce ahead of the Fed event risk.
- The pair needs a daily close above 21 DMA to confirm a bearish reversal.
GBP/USD is trading on the back foot below 1.2000, despite the latest bounce from the 1.1960 area. The US dollar has entered into a consolidative mode after staging a decent turnaround from two-week lows.
Markets remain in a risk-off mood amid looming recession fears while the UK leadership uncertainty also keeps the GBP bulls on the defensive. British PM candidate Liz Truss set out investment plans while another candidate Rishi Sunak said on Friday that he would put the government on a crisis footing from "day one" of taking office.
Although buyers continue to find support from rising expectations of a 50 bps BOE rate hike in August, especially after the S&P Global UK Preliminary Services and Manufacturing PMIs beat expectations in July.
The focus this week, however, remains the Fed rate hike decision this week. Ahead of that, traders will look forward to the UK political news and the US Durable Goods Orders data for fresh trading impetus.
Looking at cable’s daily chart, the bearish 21-Daily Moving Average (DMA) 1.2006 offers stiff resistance, recalling sellers this Monday.
Only a daily closing above the latter will confirm a bearish reversal, opening doors for a fresh recovery towards Friday’s high of 1.2064.
Further up, bulls will keep their sight on the 1.2100 round figure.
GBP/USD: Daily chart
The 14-day Relative Strength Index (RSI) is turning lower while below the midline, suggesting that bears are likely to retain control.
The immediate support is now seen at the 1.1950 level, below which Friday’s low of 1.1915 could be put to test again.
The last line of defense for GBP buyers is pegged at 1.1900, the critical demand area.