GBP/USD erases gains, back to 1.2140 as Pound losses strength

• Cable retreats from 6-day highs after being rejected from above 1.2200. 
• DXY rises after 3-day slide rebounds from 2-week low back above 97.50. 

The GBP/USD pair is about to end the day flat, hovering near 1.2150 after being unable to hold on top of 1.2200, as the US Dollar recovers ground against G10 currencies amid higher equity prices in Wall Street and a rebound in US yields. 

Pound strength limited, US Dollar rebounds

“Across the G10 board, the DXY recovered some ground with the USD appreciating against safe-haven currencies. Meanwhile, the GBP gained against both the USD and the EUR as both the European Commission and the UK are willing to discuss Brexit in the coming weeks to avoid a disorderly exit. Moreover, opponents of a no-deal Brexit hardened their stances to stop Boris Johnson from trying to leave the EU without an agreement”, explained BBVA analysts. 

The Pound during the American session trimmed gains and pulled back. Against the US Dollar erased all gains as Wall Street extended gains showing an improvement risk sentiment. 

The DXY bottomed on Asian hours at 97.20, the lowest since July 22 and then bounced to the upside. It was last seen around 97.65, on its way to the first daily gain in four days. US-China trade tensions are likely to continue to be a key driver in financial markets, particularly with a light economic calendar ahead. 

Levels to watch 

Cable weakened today after being unable to hold on top of 1.2200. If it manages to rise back above and maintains, the Pound will signal more gains ahead. The next resistance levels might be seen at 1.2245 (Jul 31 high) and 1.2295. On the flip side, the key short-term support is located at 1.2130/35; a break lower would expose 1.2100 that protects the multi-year low at 1.2075/80.