The GBP/USD exchange rate retreats toward 1.2000

A sluggish market, the US NFP, and Downing Street are all bad news for GBP.

The sentiment was dampened; however, the pair still broke below 1.2050 to hit fresh six-month lows. The pound initially gained in the Asian session on Thursday, only to reverse early gains and take offers to renew its intraday low near 1.2020 as trade moved into London on Friday morning. The recent retreat in the cable pair may be attributed to the strengthening of the US dollar due to the new risk-averse and cautious mood ahead of the June employment report from the United States.

The assassination of former Japanese premier Shinzo Abe on 8 July shook the nation and the world.  According to Kyodo news, Abe was shot in the chest and taken to hospital at around 11 in the morning local time when he was giving a speech in the Japanese city of Nara. At the time, he was unconscious and nonreactive, and he was declared dead four hours later due to large amounts of blood loss.

The developments flooded the Treasury yields, pushing the 10-year US benchmark bond down by three basis points to 2.978 per cent at the attest (down 0.80 per cent intraday). The vital bond coupons printed the first daily loss in three, allowing riskier assets such as the US dollar to recoup early-day losses.

The S&P 500 Futures drops by 0.35 per cent intraday, whereas Japan’s main equity gauge does not extend the beginning gains and retreats to 26,664, up 0.65 per cent by press time.

That being said, the US Dollar Index (DXY) receives bids and reverses the initial losses around its 20-year high. The greenback gauge took a 180-degree turn on Thursday, reversing its multi-day peak, as mixed US economic data joined retreating worries of an economic downturn caused by the Federal Reserve and Bank of England (BOE) policymakers’ efforts to downplay the recession.

After months of steady appreciation, the GBP/USD pair buyers also celebrated the resignation of UK Prime Minister Boris Johnson from the position of Conservative Party Leader after several political resignations and a strong push by his cabinet. The rebels’ hopes rise, and the political damage is limited. The search for a successor and a novice cabinet with numerous new appointments continues to keep the danger-on atmosphere tested.

As a result, GBP/USD traders must pay close attention to UK politics to obtain timely instructions. However, US employment data for June and recession news will be more vital to monitor for fresh momentum. According to the forecasts, the Nonfarm Payrolls (NFP) are anticipated to rise by 268K in June, which would be the lowest monthly increase since April last year. The unemployment rate is projected to stay at 3.6 per cent for June.

GBP/USD is now within a two-month-long falling wedge bullish chart pattern, recently flirting with the weekly resistance line around 1.2030.

However, the rebound from the stated bullish formation’s support line and an increase in the RSI (14) favour buyers aiming for the 1.2155-60 key barrier, which includes the wedge’s resistance line and is nearing 20-DMA.

Meanwhile, the bearish trend may pause near the 1.2000 psychological magnets before revisiting its prior multi-month low of 1.1876.

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