GBP/USD Forecast: Dom and downside momentum set to send sterling lower

"Sword of Domocles" – is how some have been describing the upcoming testimony of Dominic Cummings in parliament. Cummings was a senior to Prime Minister Boris Johnson and he could spill the beans on the PM's mismanagement of the pandemic, undermining the government. That could hurt sterling. 

Cummings, who became a household name as the architect of the Leave campaign, may also discuss Brexit in his appearance on Wednesday, as the topic remains on the agenda. The EU and the UK have yet to sort out how they implement the Northern Irish protocol, a leftover from the protracted process.

Another downside factor for sterling is the worrying rise of COVID-19 cases. While the increase comes from low levels – as the vaccination campaign reaches the 30-year-olds – the spread of the Indian variant is added to pound pressure. France considers restricting UK visits, following the footsteps of Germany. 

These three factors are holding sterling back, preventing GBP/USD from capitalizing on dollar weakness. The greenback has been attempting recovery on Wednesday after falling on Tuesday, fueled by the Federal Reserve's dovishness. Members of the world's most powerful central bank have been reiterating the message that inflatnoi is transitory and that the economy has a long way to go. 

Indeed, the most recent figures show the recovery is somewhat slower. Both the Conference Board's Consumer Confidence index for May and April's New Home Sales fell short of estimates. The week's most significant publications are due out on Thursday, perhaps allowing some room for the dollar to correct higher on Wednesday.

All in all, the currency pair may suffer from more pressure on Wednesday.

GBP/USD Technical Analysis

Pound/dollar has slipped below the 50 Simple Moving Average on the four-hour chart and momentum turned to the downside. These developments show bears are gaining ground. 

Some support awaits at 1.4120, the daily low, followed by 1.41, which cushioned the pair last week. Further down, 1.4075 and 1.4050 await cable.

Initial resistance is at the daily high of 1.4170, followed by 1.4210, a swing high. Further above, 14220 and 1.4240 await GBP/USD bulls.