- GBP/USD has been on the back foot as markets look depressed.
- Britain's slow exit from the lockdown is weighing on sterling, but the mood may improve.
- Thursday's four-hour chart is painting a mixed picture.
No school until March 8 – that is what children have learned from Prime Minister Boris Johnson, who laid out a lengthy exit strategy from the lockdown. A detailed plan will be out only on the week of February 22. Investors were expecting an earlier exit from the measures and are sending the pound lower.
However, Johnson may have learned from past promises and is now erring on the side of caution. In December, he rejected calls for a lockdown and refused to "cancel Christmas" only to back down several days later. Moreover, the UK has been vaccinating its population at a rapid pace – a stark contrast with the continent. The EU is suffering a delay of doses from Pfizer and also from AstraZeneca. The latter clash also involved high emotions, as AZN is a British firm.
GBP/USD has suffered from dollar strength related to safe-haven flows. Concerns about market exuberance – namely related to GameStop – have pushed broader shares lower and the safe-haven greenback higher. The risk averse movements came despite a fresh commitment by the Federal Reserve to continue supporting the economy.
The focus is now on fresh data. US Gross Domestic Product statistics for the fourth quarter are set to show slower growth, while jobless claims are projected to remain elevated. Bad news can turn into good news for markets – as it implies even more support from the central bank. In turn, that could weigh on the dollar and boost sterling.
- US Fourth Quarter GDP Preview: Variety is the spice of markets
- US Initial Jobless Claims Preview: California returns to work
President Joe Biden continues deliberating his fiscal stimulus plans with lawmakers. The topic is somewhat on the back burner but may return to the forefront.
All in all, cable may emerge from its current fall and advance once the dust settles.
GBP/USD Technical Analysis
Pound/dollar continues trading in an uptrend since late December and has bounced off the 100 Simple Moving Average on the four-hour chart– a bullish sign. On the other hand, momentum remains to the downside. Bulls remain in the lead despite the decline.
Resistance awaits at 1.3690, the daily high, followed by 1.3730, a temporary cap on the way to the 2021 peak at 1.3752.
Support awaits at 1.3620, where the uptrend hits the price, followed by 1.3520, a cushion on the way up. The next line to watch is 1.3450.
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