GBP/USD Forecast: Boris's caution and Fed's taper touches may send sterling down
- GBP/USD has been retreating amid concerns that the UK reopening could be delayed.
- The Fed's taper hints and potentially upbeat US data support the dollar.
- Thursday's four-hour chart is showing that bears are gaining ground.
"At the moment" – UK Prime Minister Boris Johnson has denied there is a need to delay the last stage of the UK's reopening but said that more information is needed. The usually confident PM has seemed more cautious after daily COVID-19 cases topped 4,000 and continue their uptrend.
While Britain's vaccination campaign is well-advanced – and continues at full speed – the new increase in infections is becoming more worrying. The Delta variant, originally identified in India, remains of worry to the UK and its neighbors, which wary receiving people arriving from Britain. The reopening – dubbed "Freedom Day" is due on June 21.
On the other side of the pond, the dollar is gaining ground after the Federal Reserve sent hints it would taper its bond-buying scheme. Philadelphia Fed President Patrick Harker said that he favors "thinking about thinking" of reducing purchases, and his words came as the bank scrapped a minuscule corporate bond-buying scheme. Every march begins with baby steps.
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The Fed is responding to several upbeat inflation figures and Thursday's ISM Services Purchasing Managers' Index is the next to reflect on price pressures. The parallel release for the manufacturing sector painted a picture of shortages due an unbalanced supply/demand picture.
US ISM Services PMI May Preview: The employment puzzle
The ISM Services PMI also serves as a hint toward Friday's Nonfarm Payrolls figures, and so does ADP's labor market report, which is set to show an increase of over 600,000 private-sector positions.
US ADP Private Payrolls May Preview: Is something amiss in the labor market?
All in all, the Fed is pushing the greenback higher and data may compound it, while sterling fears the virus.
GBP/USD Technical Analysis
Pound/dollar has failed to hold above the 50 Simple Moving Average on the four-hour chart and has dipped under the 100 SMA. Momentum remains to the downside, adding to the dovish picture.
Support awaits at 1.4115, which was a swing low on Wednesday. It is followed by the double-bottom of 1.4095, and then by 1.4050 and 1.4010.
Resistance is at the daily high of 1.4180, followed by 1.4210, which held it back last week. Further up, 1.4230 and 1.4250 are eyed.
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.
