GBP/USD Price Analysis: Contemplating the next direction amid a big week

• GBP/USD treads water ahead of critical UK data releases.
• The US dollar holds onto the recent recovery amid US-Sino woes.
• Impending bull cross could rescue cable bulls but a break above 1.2165 is critical.

GBP/USD is licking its wounds while trading around the weekly close near 1.2140, as the US dollar clings to Friday’s recovery gains in early Asia this Monday.

The greenback staged a solid comeback, despite a strong rally on Wall Street indices, as dollar bulls tracked the rebound in the US Treasury yields across the curve. The end-of-the-week flows helped the US currency to recover after falling hard earlier in the week on expectations of shallower Fed tightening amid soft inflation.

Meanwhile, the UK political uncertainty continues to remain a drag on the pound, despite the less-than-expected contraction in the economy in the second quarter. The British economy shrank -0.1% YoY in Q2 vs. -0.2% expected. With the two finalists vying to become Britain's next prime minister, Liz Truss and Rishi Sunak, the UK strongly opposed Chinese military drills that followed US House Speaker Nancy Pelosi's visit to Taiwan last week.

Looking forward, the UK jobs and inflation data will be closely examined for the next BOE rate hike path while the Fed July meeting’s minutes could steal the limelight this week.

As observed on cable’s daily chart, the bullish 21-Daily Moving Average (DMA) is on its way to crossing the downward-sloping 50 DMA for the upside, which if materializes on a daily closing basis would confirm a bull cross.

The 14-day Relative Strength Index (RSI) is trading flat but defends the midline, keeping bulls hopeful.

If buyers manage to hold onto the bearish 50 DMA support at 1.2121, the pair could stage a decent bounce back towards the 1.2150 psychological level.

A break above that will threaten the falling trendline resistance at 1.2165. The next upside target is aligned at 1.2405, the descending 100 DMA.

GBP/USD: Daily chart

Should the 50 DMA support give way, the 21 DMA at 1.2109 will come to the immediate rescue of GBP bulls.

Daily closing below the latter will kickstart a fresh downtrend towards the August 6 low of 1.2003, below which the July 26 low of 1.1953 could be tested.

GBP/USD: Additional technical levels