GBP/USD set to reach three-years highs, shrugging off overbought conditions
|GBP/USD has been benefiting from the upbeat market mood which weighs on the dollar. Robust UK job figures and less fear from the virus strains is boosting sterling – which is on course to hit three-year highs, defying overbought conditions, FXStreet’s Analyst Yohay Elam reports.
See: GBP/USD to advance nicely behind still dovish Fed and higher US inflation – MUFG
The pound has plenty of reasons to rise while the dollar has reasons to tumble down
“Britain's Unemployment Rate dropped to 4.8% in March, beating estimates and showing that the economy was strong when the reopening was just in its infancy. The more recent Claimant Count Change for April also exceeded expectations by showing a fall of 15,100.”
“Several restrictions were loosened on Monday, amid fears that the variant first found in India is spreading fast. Nevertheless, new studies showed that existing vaccines cope with this new variant efficiently. The UK is well-advanced in immunizing its population, with 35-year olds now eligible for a jab.”
“The dollar has been suffering from the Federal Reserve's insistence that rising inflation is transitory. The Atlanta Fed President Raphael Bostic is set to speak later in the day. If he does not deviate from the bank's current stance, it is hard to see the dollar recovering.”
“Cable has entered overbought territory according to the Relative Strength Index (RSI) on the 4-hour chart. It has topped the 70 level.”
“Immediate resistance is at 1.4215, which is the daily top and the highest since February. Further above, the 2021 peak of 1.4240 awaits bulls. Beyond that point, the upside target is the 2018 peak of 1.4375.”
“Some support awaits at 1.4160. which was the previous high point in May. It is followed by 1.4105, 1.4075 and 1.4050.”
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