GBP/USD: Off two-week top under 1.2400 amid US dollar pullback

• GBP/USD extends pullback from 1.2363, highest since May 12, 2020.
• Fresh fears surrounding US-China tension, Hong Kong protests help greenback to bounce off 18-day low.
• Hopes of soft Brexit, Remdesivir usage in the UK fail to keep the pair buyers.

GBP/USD steps back from two-week top to 1.2320, down 0.11% on a day, while heading into the London open on Wednesday. Although optimism surrounding Brexit and the usage of the famous coronavirus (COVID-19) drug should ideally help the Cable extend the previous run-up, recent challenges to risks trigger the US dollar recovery and weigh on the quote. As a result, the pair traders are likely to pay a little more attention to the US-China story for fresh impulse.

Following the news that the European Union’s (EU) Brexit negotiator Michel Barnier was said to drop demand of unchanged access to the fishing grounds around the UK’s coast, Britain based pro-Brexit think tank came out with the upbeat analysis. “Robert Oulds, director of the Bruges Group, said the UK needed to head into the EU talks without any thoughts of further delay. The European Union will then know that we mean business in Britain,” said the UK Express.

Also on the positive side could be the BBC’s news saying, “a drug treatment called Remdesivir that appears to shorten recovery time for people with the virus is being made available on the National Health Services (NHS).”

On the contrary, allegations against the Tories not following the lockdown guidance and diverting the virus funds to own areas rather than poorer parts of England keep pilling pressure on the PM Boris Johnson-led government.

US President Donald Trump finally said the sanctions for China will be announced by the end of the week. Also favoring the greenback’s recovery from the lowest since May 01 could be calls of fresh protests in Hong Kong.

Given the lack of major data and the markets’ U-turn to the US-China tussle, previous optimism backed by the nearness to the pandemic cure and economic reopen seems to have faded off-late. As a result, GBP/USD traders may await further escalation in the tension between the world two top economies for additional direction.

Technical analysis

While bulls are cheering the MACD histogram’s favor after many days, fresh entries are likely awaiting the sustained break of 1.2370/80 area including 50-day EMA and a falling trend line from March 09. Meanwhile, the sellers may stay away unless witnessing a break of the ten-week-old rising support line, at 1.2170 now. Though, odds for further declines to Monday’s top near 1.2200 can’t be ruled out.

Additional important levels