GBP/USD breaks above 1.2000 as the dollar continues to fall

• Risk-off sentiment favors the pound on Monday.
• Busy week in the UK between politics and key data.
• The pound is facing the next resistance levels at 1.2050 and 1.2065.

The GBP/USD it has broken above 1.1990 during the American session and jumped to 1.2033, reaching the highest level since July 8th. He is hovering around 1.2010/15, up 150 pips on the day, buoyed by US dollar weakness.

Improved feeling of risk

Stock prices finished higher in Europe with the Dow Jones gaining 0.54% on Monday. The latest round of US economic data and signs that the Federal Reserve will raise rates by “only” 75 basis points are helping to improve market sentiment. Investors are also awaiting the first corporate results for the second quarter.

In the UK, the political drama continues. The final candidates for prime minister should be clear on Thursday. In addition to politics, UK economic data will be key for the week. The labor market will be published on Tuesday. Later in the week, the CPI, PMI and Retail Sales will be released.

The next meeting of the Bank of England will be on August 4. A rate hike of 50 basis points is expected. On Monday, Saunders said that interest rates could exceed 2% in 2023 and stressed that the central bank must act to avoid high inflation.

In the United States it is a quiet week in terms of economic data. Attention is on next week’s Federal Reserve meeting. Market participants see a rise of 75 basis points. The odds of a further rise softened on Friday.

Looking at 1.2050

The very short-term bias is bullish for GBP/USD. Though the pair is facing strong resistance around 1.2050 and also 1.2065. Therefore, a firm break above is needed to clear the way for more gains. While below the mentioned area, the increases would be limited. Immediate support could be seen at 1.1950, followed by 1.1920 and 1.1850.

Technical levels