GBP/USD Forecast: Bears defy promises of irreversible reopening, US data set to add pressures

GBP/USD has been under pressure as UK covid cases continue rising.
Reopening fears and an upbeat US consumer could push the pair lower.
Tuesday's four-hour chart is showing bears are in control.

Yohay Elam FXStreet

"No date we chose comes with zero risk for covid – these words by the newly installed UK Health Secretary Sajid Javid have failed to keep cable from falling. Javid wants to stick with the new reopening date of July 19 and insists that a return to normal is needed.

His words come on the backdrop of a surge in coronavirus infections – 22,868 reported on Monday, the highest since late January. However, Britain's hospitals have been only seeing a minor increase in admissions, while deaths remain depressed as well. So far, vaccinations have proven efficient in breaking the link between contracting the virus and serious illness.

By July 19, also dubbed as "Freedom Day", the UK will have vaccinated millions more, thus enabling the return to normal despite the rapid spread of the Delta variant. Will this convince buyers to jump on the pound? Not so fast, as more time is needed to see that this strain first identified in India is indeed unable to resist vaccines. Uncertainty could keep the pressure on the pound.

On the other side of the pond, the dollar benefits from cautious optimism about the US recovery while fears about inflation have taken a step back. The Conference Board's Consumer Confidence statistics for June are set to show an increasing sentiment among shoppers, potentially giving the greenback another boost.

Conference Board Consumer Confidence June Preview: Pragmatism above all

Investors are also eyeing developments around the bipartisan infrastructure bill, which still has to be fully drafted and receive support from additional members of Congress. Any new backing could support the dollar.

All in all, the pressure on GBP/USD will likely continue.

GBP/USD Technical Analysis

Pound/dollar has been unable to recapture the 50 Simple Moving Average on the four-hour chart and suffers from downside momentum. Moreover, the Relative Strength Index is above the 30 level, thus far from oversold conditions – allowing for more falls.

Some support is at the daily low of 1.3860, followed by 1.3825, which capped cable when it was down in mid-June. The last line to watch is the monthly low of 1.3780.

Weak resistance is at 1.3885, the daily high. It is followed by 1.3940, which was a high point early in the week. Further above, the round 1.40 line is critical resistance.

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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