GBP/USD Forecast: Selling opportunity? Risk-off mood could send sterling back down
Premium|Take advantage of 50% OFF on your first month.
Start your subscription and get access to all our original articles.
You have reached your limit of 5 free articles for this month.
Get Premium without limits for only $9.99 for the first month
Access all our articles, insights, and analysts.
UNLOCK OFFER- GBP/USD has bounced off 1.38 as the US takes a breather from gains.
- Concerns about inflation and covid could send the pair back down.
- Friday's four-hour chart is painting a mixed picture.
Pinging hell – Hundreds of thousands of Brits have received notifications saying "You need to self-isolate" due to exposure to someone tested positive for COVID-19. While some of these warnings may have been caused by Bluetooth signals passing through neighbors' walls, the increase in pings serves as additional evidence that the coronavirus spreading rapidly. Under such conditions, it is hard to justify further gains for GBP/USD.
The Delta variant's spread has resulted in over 48,000 confirmed cases in the UK on Thursday, days before the grand "Freedom Day" reopening on July 19. Hospitalizations and deaths are also on the rise, adding to concerns of an economic slowdown resulting from quarantines.
A slowdown might cause even hawkish members of the Bank of England to reconsider their stances. Michael Saunders was the latest BOE official to suggest the bank should end its bond-buying scheme, sending sterling temporarily higher on Thursday. Any dovish comments could weigh on the pound.
The virus is also moving quickly in the US – resulting in increases in almost all states. However, America's caseload is rising from a low base and it could have a positive effect on the dollar – a safe-haven currency.
Worries about rising prices and how to tackle them are also contributing to a damp mood and a rush to the greenback. Federal Reserve Chair Jerome Powell said inflation is "uncomfortably high" but added that the situation of reopening the economy is "unique." Clouds of uncertainty are dollar-positive.
Apart from Britain's daily release of covid statistics, investors are eyeing two significant releases – Retail Sales and Consumer Sentiment from the University of Michigan. Economists expect overall shopping to have dropped in June, while the Retail Control Group is projected to edge higher.
See US June Retail Sales Preview: Analyzing major pairs' reaction to previous releases
In the preliminary consumer confidence figures for July, markets will likely focus on inflation expectations – the Fed is watching these surveys as well. Any sign that higher prices are anchored into people's mindsets could boost the dollar.
See US Michigan Consumer Sentiment Index July Preview: Are inflation expectations changing?
All in all, there is room for cable to climb back down.
GBP/USD Technical Analysis
Pound/dollar is suffering from downside momentum on the four-hour chart but continues battling both the 50 and 100 Simple Moving Averages – resulting in a mxied picture as range-trading continues.
Support awaits at the daily low of 1.3791, followed by 1.3750, a cushion from last week, and then by 1.3730.
Some resistance is at the daily high of 1.3860, followed by 1.3910, which held GBP/USD down in recent days. Further above, 1.3935 and 1.40 are eyed.
- GBP/USD has bounced off 1.38 as the US takes a breather from gains.
- Concerns about inflation and covid could send the pair back down.
- Friday's four-hour chart is painting a mixed picture.
Pinging hell – Hundreds of thousands of Brits have received notifications saying "You need to self-isolate" due to exposure to someone tested positive for COVID-19. While some of these warnings may have been caused by Bluetooth signals passing through neighbors' walls, the increase in pings serves as additional evidence that the coronavirus spreading rapidly. Under such conditions, it is hard to justify further gains for GBP/USD.
The Delta variant's spread has resulted in over 48,000 confirmed cases in the UK on Thursday, days before the grand "Freedom Day" reopening on July 19. Hospitalizations and deaths are also on the rise, adding to concerns of an economic slowdown resulting from quarantines.
A slowdown might cause even hawkish members of the Bank of England to reconsider their stances. Michael Saunders was the latest BOE official to suggest the bank should end its bond-buying scheme, sending sterling temporarily higher on Thursday. Any dovish comments could weigh on the pound.
The virus is also moving quickly in the US – resulting in increases in almost all states. However, America's caseload is rising from a low base and it could have a positive effect on the dollar – a safe-haven currency.
Worries about rising prices and how to tackle them are also contributing to a damp mood and a rush to the greenback. Federal Reserve Chair Jerome Powell said inflation is "uncomfortably high" but added that the situation of reopening the economy is "unique." Clouds of uncertainty are dollar-positive.
Apart from Britain's daily release of covid statistics, investors are eyeing two significant releases – Retail Sales and Consumer Sentiment from the University of Michigan. Economists expect overall shopping to have dropped in June, while the Retail Control Group is projected to edge higher.
See US June Retail Sales Preview: Analyzing major pairs' reaction to previous releases
In the preliminary consumer confidence figures for July, markets will likely focus on inflation expectations – the Fed is watching these surveys as well. Any sign that higher prices are anchored into people's mindsets could boost the dollar.
See US Michigan Consumer Sentiment Index July Preview: Are inflation expectations changing?
All in all, there is room for cable to climb back down.
GBP/USD Technical Analysis
Pound/dollar is suffering from downside momentum on the four-hour chart but continues battling both the 50 and 100 Simple Moving Averages – resulting in a mxied picture as range-trading continues.
Support awaits at the daily low of 1.3791, followed by 1.3750, a cushion from last week, and then by 1.3730.
Some resistance is at the daily high of 1.3860, followed by 1.3910, which held GBP/USD down in recent days. Further above, 1.3935 and 1.40 are eyed.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.