GBP/USD stays depressed around 1.2100 amid Brexit, recession jitters

• GBP/USD fails to cheer US dollar pullback amid Brexit fears, political woes at home.
• Labour Party steps back from Brexit rejections, UK PM Johnson struggles to defend position amid partygate scandal.
• US-China trade dialogue helps improve market sentiment, yields fail to propel USD.
• US Factory Orders, final readings of UK PMIs will be important for fresh impulse.

GBP/USD struggles to defend 1.2100 as pessimism surrounding Brexit and the UK politics weigh on the cable pair even as the US dollar retreat from a two-week high. That said, the quote remains directionless and awaits more clues heading into Tuesday’s London open.

With the Labour Party Leader Keir Starmer’s u-turn towards favoring Brexit, the hardships for the Tories during re-election will increase, if it all takes place. Also portraying the Brexit woes is the deadlock over the Northern Ireland Protocol (NIP).

Elsewhere, UK PM Boris Johnson is under immense pressure from all sides, be it from the opposition or the Tory rebels after the ‘partygate’ scandal. Recently, the British politicians are bracing for another attempt to oust the national leader by trying to alter the committee rules that previously defended Johnson.

On a broader front, comments from Chinese Vice Premier Liu He suggests an improvement in the US-China trade ties, at least for now, which in turn favored the market sentiment previously. “The two agreed to need to strengthen communication & coordination of macroeconomic policies between China and the US,” said the macro update conveying telephonic talks between China’s Liu He and US Treasury Secretary Janet Yellen.

On a different page, fears of recession join the Bank of England’s (BOE) inability to convince the Cable buyers to weigh on the GBP/USD prices.

Moving on, final readings of the UK’s June S&P Global month Composite PMI and Services PMI will entertain the pair traders before the Federal Open Market Committee (FOMC) Minutes and the US Jobs report for June. For intraday, the US Factory Orders for May, expected 0.5% versus 0.3%, could direct short-term traders.

Technical analysis

GBP/USD pair holds onto the previous day’s upside break of the weekly resistance, now support around 1.2090, to portray an inverse Head and Shoulders (H&S) formation. However, buyers need to cross the 1.2155 neckline hurdle to gain the market’s acceptance. Even so, the 200-HMA and the 61.8% Fibonacci retracement level of June 27 to July 01 downside, around 1.2200, appears a tough nut to crack for the bulls.