GBP/USD Forecast: Buy the dip opportunity? Britain's virus advantage may send sterling higher

GBP/USD has been retreating amid hopes for a large US stimulus package.
The UK's vaccination drive and falling virus numbers could boost sterling.
Monday's four-hour chart is pointing to fresh gains for cable.

Yohay Elam FXStreet

Betting on Biden – Markets are cheering President Joe Biden's push for passing a larger relief package, and the dollar advances with higher bond yields. However, sterling has room to recover.

Both the Commander-in-Chief and Treasury Secretary Janet Yellen have been urging Congress to "go big" in a series of media appearances following Friday's disappointing jobs report. The US gained only 49,000 positions in January, worse than expected.

While investors are not expecting the total plan to reach the original $1.9 trillion suggested by Biden, they are pricing prospects of a sum closer to that rather than near the Republican offer of roughly $600 billion Democrats have advanced a spending blueprint without GOP support and the outcome depends only on internal negotiations.

Stocks are on the rise on hopes for faster growth while bonds are sold off ahead of potentially elevated debt issuance. In turn, higher yields on Treasuries make the dollar more attractive. While the case for robust stimulus remains dollar positive, it is unlikely to pass immediately, allowing for the dollar to take a breather.

Yet the bullish case for GBP/USD is based on virus figures. First, the UK's vaccination drive is gaining pace, with over 17% of the population already having received one short, nearly double America's 9.1%. Secondly, Britain has borne the brunt of the B 1.1.7 strain – aka British variant – while that more contagious version of coronavirus is only beginning to spread in the US. Cases are falling on both sides of the Atlantic, but they may turn back up in America.

Looking forward, the week features UK Gross Domestic Product figures, which might beat estimates – at least according to the Bank of England's hints last week. The BOE specifically referred to the fourth quarter of 2020 and sounded optimistic.

All in all, GBP/USD has room to recover from the recent slide toward 1.37.

GBP/USD Technical Analysis

Pound/dollar is benefiting from upside momentum on the four-hour chart and trades above the 50, 100 and 200 Simple Moving Averages, a bullish sign.

Some resistance awaits at the daily high of 1.3740, closely followed by the 2021 peak of 1.3752. Further above, 1.3810 and 1.40 are eyed.

Support is seen at 1.3680, where the 50 SMA hits the price. The next cushion is 1.3615, which was a low point last week. The next level to watch is 1.3565, the February trough.

GBP/USD Price Forecast 2021: Cable braces for calendar comeback amid three exits

Premium

You have reached your limit of 3 free articles for this month.

Start your subscription and get access to all our original articles.

Subscribe to Premium Sign In

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.

GBP/USD bounces off lows, back above 1.3200

After bottoming out near 1.3160, GBP/USD manages to regain a bit of shine and reclaim the 1.3200 mark and beyond at the end of the week. Stronger-than-expected UK Retail Sales data seem to be helping the British Pound limit its losses, while the chaotic UK political environment keeps the bulls at bay for now.

EUR/USD looks consolidative around 1.1460

EUR/USD stages a modest rebound after slipping to a three-month low below 1.1420 at the end of the week. That said, the pair now looks to consolidate humble gains just above 1.1460 despite growing uncertainty surrounding the next round of US-Iran negotiations, which keeps the US Dollar’s downside contained.

Gold slips back to six-day lows, targets $4,100

Gold retreats for the third consecutive day on Friday, eroding gains seen in the first half of the week and approaching the key $4,100 mark per troy ounce. Indeed, the precious metal continues to face headwinds from the Fed's hawkish stance and renewed uncertainty surrounding the next round of US-Iran negotiations.

Solana extends correction despite ETF inflows, RWA adoption

Solana (SOL) price edges below $70 extending its losses for the fourth straight day this week. The institutional demand for Solana is building, with steady inflows so far this week and Morgan Stanley’s amended S-1 filing for a Solana-focused Exchange-Traded Fund.

The Iran war didn't break the US economy, but what happens next?

Nearly four months after the start of the Iran war, the US economy remains remarkably resilient. While the conflict initially triggered a severe disruption to global energy markets and a sharp rise in Oil prices, recent diplomatic progress between Washington and Tehran has eased concerns about a prolonged supply shock.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.