GBP/USD Forecast: Downed by Dom? Not so fast, pound propelled by positive developments
|- GBP/USD has been ignoring the Cummings scandal and rising as the UK reopens.
- Optimism about a vaccine and the upholding of the Sino-American deal is weighing on the dollar.
- Tuesday's four-hour chart is showing momentum has turned positive.
One rule for people at the top, another for all the rest – senior Downing Street adviser Dominic Cummings has no regrets for violating the lockdown he contributed to devising. Prime Minister Boris Johnson backed his aide and some Conservatives are worried that the PM is spending too much political capital on an unelected official. The scandal triggered the resignation of Douglas Ross, the Scotland minister, and may limit the government's power to convince the public of its its moves.
Nevertheless, the pound is moving higher amid the PM's announcement to gradually reopen shops in June. Relatively low COVID-19 statistics published on Monday also help, yet these are partially attributed to the "weekend effect"– data is not fully updated on non-working days.
Sterling is also shrugging off the impasse in Brexit talks. The EU and the UK remain at loggerheads over future relations as the clock is ticking down toward the June 2 deadline at which both parties can opt to extend the transition period – something that Johnson has repeatedly ruled out.
It seems that the Bank of England's growing intent to set negative rates is price into the pound.
GBP/USD is also rising amid US dollar weakness. Demand for safe-haven assets is diminishing amid new hopes for a vaccine, this time from Novavax, a Maryland-based pharma firm. Investors are shrugging off ongoing tensions between the US and China, currently centered around Washington's blacklisting of several Chinese firms. Investors are content with the world's largest economies' pledge to hold up the trade agreement.
Will the uptrend continue? Further resignations of ministers may weigh on the pound, and so could another adverse twist in Sino-American relations. President Donald Trump may tweet in the US session. Without significant developments on these fronts, traders will also watch several US housing figures, including sales of new homes, and also the Conference Board's Consumer Confidence gauge.
See: CB Consumer Confidence Preview: Can that be the turn? Behind us?
Both American and British traders are back from long weekends, and volatility will likely rise.
GBP/USD Technical Analysis
Momentum on the four-hour chart has turned positive and cable has climbed above the 50 Simple Moving Average. IT is now approaching 100 SMA. All in all, bulls are gaining ground.
Resistance awaits at 1.23, a high point last week. Further up, 1.2340 and 1.2380 were stepping stones on the way down, and 1.2465 is a far upside target.
Some support awaits at 1.2250, a former double-bottom, and the next level to watch is 1.2210, a swing high on Friday. Further down, 1.2160 and 1.2080 await the pair.
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