GBP/USD bulls take on bearish commitments near daily resistance structural confluences

• Cable has rallied into a critical daily resistance area ahead of the Jackson Hole showdown.
• GBP/USD bears looking to the longer-term time frames and prospects of a resurgence in the greenback.

GBP/USD is pushing a higher on Wednesday albeit lacking conviction with markets counting down to the Federal Reserve's Jerome Powell's keynote speech on Friday.

At the time of writing, GBP/USD is trading at 1.3764, up by 0.27% after drifting up from a low of 1.3696 to a high of 1.3766 in what could be a final shakeout in the greenback and positioning ahead of the Jackson Hole that starts on Thursday. 

The US dollar is losing some of the earlier traction made on Wednesday after three straight down days.

As measured against a basket of currencies, the DXY index continues to find support near 92.80 which is important, for otherwise, it will be staring into the abyss not much below there. 

Still, most major currencies remain within recent trading ranges ahead of Jackson Hole and in the absence of critical data, this period of consolidation is likely to persist into Friday.

Risk appetite is mixed and the pound has been regarded as a risk currency due to the nation's twin deficits. 

Sterling has found support this week as the greenback falls away and investors price in an apex in the delta variant wave in key economies such as the US and China. 

This gave commodity prices a lift at the start of the week, supporting risk currencies such as GBP.

Speculators reduced their net long position on the pound in the week up to last Tuesday, CFTC data showed on Friday. 

However, net GBP positions remained in positive territory for a second consecutive week.

Hawkish speeches from two MPC members in the middle of July translated into a more hawkish slant from the Bank of England policy meeting in early August which lifted the pound.  

However, softer UK CPI inflation data and weaker than expected Retail Sales numbers as well as the spread of the Delta variant are likely to be constraining influences. 

Since mid-July when lockdown restrictions were lifted, Britain has been reporting a steady increase in the numbers of people dying.

"COVID news has the potential to have some sort of restrictive influence on consumer behaviours and I think all of these do feed into the Bank of England debate for next year," said Jane Foley, head of FX strategy at Rabobank.

Coronavirus cases are expected to soar following the return of summer music festivals and schools, ​particularly among younger groups who are largely unvaccinated, an expert has said, as reported in the UK's Telegraph.

''Professor Ravindra Gupta, from the New and Emerging Respiratory Virus Threats Advisory Group, told BBC Radio 4’s World at One programme that an upcoming rise in Covid-19 infections is 'predictable and will happen “despite best efforts”.

'We know that Delta is far more infectious, it ramps up very quickly. We know the lateral flow devices are not perfect. So we just have to be realistic and say that this is going to lead to a significant surge in infections.'

''He added that medical professionals are “worried” about the implications of a surge in cases, which will 'cause significant problems for us all'.''

Meanwhile, market attention is focused on Friday's Jackson Hole conference, at which some investors expect Chair Jerome Powell to give hints about tapering the Fed's bond-buying scheme.

However, if it turns out to be a non-event, the status quo risk-on theme in markets could see stocks underpinned and the US dollar back under pressure, ultimately supporting GBP as a bi-product of forex flow. 

More on this here: US dollar at make or break point, countdown to taper

GBP/USD technical analysis

(Monthly chart)

(Weekly chart)

The pound has potentially formed a bearish head & shoulders pattern on the weekly and monthly time frames.

(Daily chart)

From a daily perspective, the price is moving on on a trendline resistance as it takes on critical structures, eyeing the 1.3790s and prior support. 

A break there will likely lead to an ongoing bullish counter-trend and invalidate immediate bearish prospects as per the long-term bearish head and shoulders patterns. 

However, failures here, potentially on a resurgence in the greenback, will probably seal the deal for the cable bears.