GBP/USD Forecast: Delta variant hurting the pound

Valeria Bednarik FXStreet

GBP/USD Current price: 1.3808

UK Retail Sales unexpectedly fell in May against an expected advance.
The Bank of England is having a monetary policy meeting this week.
GBP/USD extremely oversold but bearish in the near-term.

The GBP/USD pair traded as low as 1.3791, its lowest since mid-April, ending the week a couple of pips above such a level. The pound fell for a fourth consecutive day, not only pressured by resurgent dollar demand but also by tepid UK data. On Friday, the country published May Retail Sales which were down 1.4% MoM, missing an expected 1.6% advance. Annual sales were up 24.6%, well below the previous 42.4%.

The sour tone of the UK currency was also backed by coronavirus-related concerns amid the exponential growth of new contagions related to the Delta variant, which may delay further easing lockdown measures. Looking ahead, the Bank of England is having a monetary policy meeting. The central bank could turn hawkish on the back of higher inflation, although a rate hike seems unlikely for this year and the next. Should policymakers hint something different, a strong pound reaction could be expected.

GBP/USD short-term technical outlook

From a technical point of view, the GBP/USD pair is bearish. The daily chart shows that the price has broken below a bullish 100 SMA for the first time in almost a year, while the 20 SMA heads firmly lower above it. Technical indicators maintain their bearish slopes within oversold readings. In the 4-hour chart, technical indicators retain their bearish momentum despite being in extreme oversold readings, hinting at further declines ahead.

Support levels: 1.3760 1.3715 1.3680

Resistance levels: 1.3840 1.3890 1.3930

View Live Chart for the GBP/USD

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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