The risk appetite, with the gradual opening of the British economy, are factors that contributed to the gains of the GBP/USD and reached the 1.2362 resistance and tried to break through during the session yesterday, but failed to achieve that, and then the returned to the 1.2204 support, and from there stabilized around the 1.2260 level in the beginning of today’s trading. As I had often expected, Pound gains will remain a selling targets, as the future of Brexit remains unclear.
After two months of economic closures and more than 37,000 deaths from the Coronavirus, Britain on Wednesday implemented a nationwide "test and trace" program - a massive measure designed to help isolate the virus and bring the country back to normal. Prime Minister Boris Johnson also hopes the program, which starts in England on Thursday, will divert the nation's attention away from anger over allegations that his assistant has broken government rules of closure on a trip across the country.
The test and trace project includes 50,000 workers, including 25,000 tracers hired to track contacts of anyone whose test was positive for COVID-19. The goal is to isolate the infected before the virus spreads. Similar programs are being offered in Scotland, Wales and Northern Ireland. Johnson said that testing and tracing could "open" the prison. He admitted that Britain was not prepared to launch such a process when the outbreak began for the first time. The official death toll in Britain from coronavirus is 37,460, the highest death toll in the world after the United States.
The Pound collapsed after British negotiator David Frost poured cold water on proposals for progress in trade talks when he told parliament he “started thinking we might not make it by June 30”, referring to a point where Prime Minister Boris Johnson is expected to decide whether it is worth it to continue trade negotiations with the European Union or simply throwing all the government's weight behind efforts to prepare for the "no Brexit deal" at the end of the year.
Frost was responding to a question about the possibility of an agreement on fisheries, after it was reported that the European Union was preparing to drop its "maximum approach" towards them. The British waters and the abounded fish stocks there are considered a "shared resource" that gives everyone on the European table an automatic share of it, a situation that the European Union wants to preserve, but the advocates of Brexit have long opposed it.
The exploitation of fisheries after Frost told parliament that there is a "fundamental difference" with the European Union regarding "most aspects" of the so-called "equal playing field", which is a comprehensive sign of a set of legal terms that would maintain, sustain and control the influence of the European Union in a group of the policy areas at a time when the British goal is to end this influence and control. Frost later described the mandate of negotiator Michel Barnier from the European Union as "unlikely to reach an agreement" and told lawmakers that the bloc "needs to develop its position." This was, as it turned out, Barnier attempt to bypass the British government with a letter to a group of dwindling opposition parties, in a clear attempt to spark the same activity that produced multiple extensions to the Article 50 period in 2019.
Brexit’s talks will resume on June 1, the last round before Prime Minister Johnson and the European Union’s June 30/July 1 deadline for the UK to choose to extend the transition period or not.
According to the technical analysis of the pair: On the daily chart, the GBP/USD pair is still under downward pressure and still needs to move towards the resistance levels of 1.2385 and 1.2470 because that will technically support breaking its current downward channel and increasing its purchases, and this may happen if positive signs appear for Brexit, the strongest influencing factor on sterling. On the other hand, stability below the 1.2200 support will restore the bear's control, and thus pave the way for the 1.2000 psychological support at the earliest time.
As for the economic calendar data today: All focus will be on the US economic data, which includes the announcement of the US GDP growth rate, jobless claims, durable goods orders and pending home sales.
