GBP/USD drops further below 1.4000 as DXY soars
|- US Dollar continues to rally into the US session.
- DXY heads for the highest close in three months.
The GBP/USD pair continued to decline on Monday and fell below previous April lows. Recently bottomed at 1.3925, the lowest since March 19. Near the end of the session it was hovering around the lows with the bearish tone intact.
The main driver of the pair was US Dollar strength. The greenback continued to rally across the board as US yields climbed further. The 10-year reached 2.99% before pulling back modestly. The spread between US and UK bonds widened.
The US Dollar Index (DXY) rose sharply to 90.96, the strongest level since January 18. At the same time, Cable dropped to the lowest in a month. GBP/USD lost more than 400 pips in a week. The negative tone prevails with extreme oversold reading.
Data released today had no impact. In the US, Existing Home Sales for March that rose to 5.60 million, above estimates of 5.55 million and the flash PMI advanced from 54.2 to 54.8 below the 55.3 expected. Tomorrow, New Home Sales data is due and also the S&P/Case Shiller Price Index. In the UK, on Tuesday, data includes Public Sector Borrowing.
Levels to watch
GBP/USD broke below an uptrend line on Friday and today dropped further below, consolidating the move. If the slide continues, the next support area is seen at 1.3900/05 followed by 1.3865 and 1.3830. On the upside, immediate resistance might lie at 1.3950/55, 1.3975 and 1.3990.
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