GBP/USD recovers to 1.30 as USD upsurge falters

The GBP/USD pair dropped to 1.2970 in the early NA session after the macro data from the U.S. triggered a USD rally. However, as the DXY struggled to keep its bullish momentum the pair was able to retrace its losses. As of writing, the pair was trading at 1.3003, up 0.1% on the day.

The US Dollar Index, which was able to reach a fresh weekly high at 93.77 after the data released by the U.S. Bureau of Labor Statistics showed that the nonfarm business sector labor productivity increased 0.9% during the second quarter of 2017 while the unit labor costs rose 0.6% for the same period, is now virtually unchanged around mid-93s. 

On the other hand, latest developments from the U.K. failed to deliver a clear insight into the Brexit process. A recent letter by David Davis, Secretary of State for Exiting the European Union, showed that the second round of negotiation talks has been productive and has given them a lot to be positive about even though it was difficult. However, Davis also pointed out that there still was a significant convergence on key Brexit issues in talks. 

• UK Brexit Sec. Davis: Significant step forward has been taken in Brexit talks

On Thursday, the economic docket will feature industrial production data and trade balance figures from the U.K. Mário Blaščák, European Chief Analyst at FXStreet, writes, "given the fact that the UK industrial production and manufacturing output are expected to slow down markedly in June, but the basis effect and general economic resilience of the British economy in post Brexit environment, short-term spike lower is seen as an opportunity to build strategic long GBP/USD position."

Technical outlook

The pair could encounter the initial hurdle at 1.2945 (50-DMA) ahead of 1.2900 (100-DMA) and 1.2810 (Jul. 12 low). On the upside, resistances could be seen at 1.3070 (20-DMA), 1.3160 (Aug. 4 low) and 1.3260 (Aug. 3 high). Although the RSI on the daily graph remains below the 50 mark, it's moving sideways, suggesting that the bearish pressure is on hold.

• GBP/USD: Relative US-UK data to retain downside bias - ING