GBP/USD price extend gains to trade above $1.25 again

GBP/USD price extend gains to trade above $1.25 again
Written by:
Michael Harris
2nd July, 13:13
  • GBP/USD has extended its bullish run to trade above $1.25 again following a strong close yesterday
  • Boris Johnson has reiterated that the furlough scheme won’t be extended beyond October
  • The bulls are now likely to push for a move towards a strong resistance area around $1.26

GBP/USD price has continued its rally today to trade above the $1.25 again as the buyers now eye a trip towards the $1.26 handle. In the meantime, PM Johnson has reiterated that the furlough scheme won’t be extended beyond October. 

Fundamental analysis: No extension of the furlough scheme planned

The UK Prime Minister, Boris Johnson, issued a “very blunt” warning to the Brits saying that the current furlough scheme won’t be extended beyond October. The program, which has protected over 9 million jobs in the past few months, has already been extended once. 

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“I’ve got to be very, very blunt with you. We’ve spent £120 billion supporting people, it’s a huge commitment and we have put our arms around people,” said Johnson.

“The best way forward for us now is to work together to beat the virus and get the economy back on its feet. We’re going to do amazing things; we’re going to build, build, build, invest massively in our country”. 

The scheme, which involves paying up to 80% of the wages, will start to unwind in August. It is believed to cost the country around £60 billion.

“You are keeping people in suspended animation. You are stopping them from actually working. I am being absolutely frank with you, we are pushing it out until October but in the end you have got to get the economy moving,” Johnson added. 

Johnson’s words won’t sit well with business after the BoE said it expects the peak unemployment to arrive in the fourth quarter, when the furlough scheme is set to end.

Bank of America’s currency analyst said last week that the pound should now be seen as an emerging market currency.

Technical analysis: The pound rallies

GBP/USD price has managed to get back above the $1.25 mark again after rolling in the past few days. Yesterday’s close above the 100-DMA paved the way for the extension of a bull run to hit a fresh 1-week high at $1.2530. 

GBP/USD daily chart (TradingView)

The bulls are now eyeing a trip towards the $1.26 handle where a confluence of resistance is located. The area between $1.26 and $1.2740 consists of horizontal and diagonal resistance levels, including the 200-DMA at $1.2680. 

Summary

GBP/USD price has extended its rally today after managing a close above the $1.2460 handle yesterday. The buyers are now looking to take the price movements towards $1.26. Separately, Borish Johnson has reiterated that the furlough scheme won’t be extended beyond October. 

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