GBP/USD Forecast: Seems poised to move beyond 1.2800 mark

• GBP/USD attracted some dip-buying on Wednesday amid sustained USD selling bias.
• Worsening US-China relations led to a bit of caution and might cap any strong gains.

The GBP/USD pair had some good two-way price swings on Wednesday and was influenced by a combination of diverging factors. The Daily Telegraph – citing government sources – reported that the UK government and the EU will fail to sign a post-Brexit trade deal. The newspaper further added that the government expects to be trading on World Trade Organisation (WTO) terms when the transition period comes to an end. This comes days ahead of the UK Prime Minister Boris Johnson's July deadline for an outline agreement and revived fears of a no-deal Brexit. This, in turn, took its toll on the British pound and exerted some pressure on the major.

The pair slipped below mid-1.2600s, albeit managed to attract some dip-buying amid the emergence of some fresh selling around the US dollar. Worries that the continuous surge in new coronavirus cases in the US could delay the economic recovery, coupled with the impasse over the next round of US economic stimulus measures continued exerting pressure on the greenback. It is worth reporting that Republican-majority Senate has been ignoring a $3 trillion relief bill already passed by the Democrat-majority House of Representatives two months ago. A broad-based USD selling assisted the pair to rebound nearly 100 pips from intraday lows and finally settle near the top end of its daily trading range, comfortably above the 1.2700 mark.

The momentum extended through the Asian session on Thursday and lifted the pair back closer to multi-week tops set earlier this week. Meanwhile, concerns over worsening US-China relations might lead to a bit of caution in the global financial markets and cap any strong gains. Diplomatic tensions between the world's two largest economies escalated further after the US abruptly ordered China to close its consulate in Houston amid accusations of spying. China was quick to respond and vowed to respond with firm countermeasures, sparking fears that the latest dispute could be the one to halt the US-China phase-one trade deal.

In the absence of any major market-moving economic releases from the UK, a scheduled speech by external BoE MPC Member Jonathan Haskel will be looked upon for some impetus. This coupled with any incoming Brexit-related headlines could influence sentiment surrounding the sterling. Later during the early North American session, the release of the US Initial Weekly Jobless Claims might further contribute to produce some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, the overnight goodish bound and a subsequent positive move supports prospects for additional gains. Hence, a move back towards testing June monthly swing highs, levels just above the 1.2800 round-figure mark, remains a distinct possibility. Any further move up is more likely to confront stiff resistance, rather remain capped near the 1.2875-80 region.

On the flip side, the 1.2700 round-figure mark now seems to act as immediate strong support, below which the pair could slide back to the overnight swing lows, around the 1.2645-40 region. Failure to defend the mentioned support might prompt some technical selling and accelerate the slide back towards the 1.2600-1.2590 region. This is followed by a short-term ascending trend-line, around the 1.2545-40 region, which if broken decisively might negate the near-term constructive outlook.