- GBP/USD has surged above 1.31 amid a massive dollar sell-off.
- The new lockdown in parts of northern England and end-of-month flows may trigger a correction.
- Friday's four-hour chart is pointing to extremely overbought conditions.
North in Lockdown 2 – the headline of one of Britain's tabloids sums up the developments with which around 4.3 million Brits living in Manchester and in other parts of northern England have to deal with. The spike in cases in these regions triggered an announcement late on Thursday, triggering confusion.
Nevertheless, GBP/USD has extended its relentless northbound ride – stemming in full from the dollar's weakness. The greenback is suffering from a multitude of reasons. Safe-haven flows continue unwinding while speculation of further Fed stimulus – as Yield Curve Control (YCC) are pushing returns on bonds lower, dragging the dollar down with them.
US Gross Domestic Product for the second quarter came out better than expected – but still a devastating 32.9% annualized drop. Moreover, continuing claims for the week ending July 17 – the period when Non-Farm Payrolls surveys are conducted – disappointed by topping 17 million.
Personal income and spending figures for June and the revised University of Michigan's Consumer Sentiment Index for July are of interest later in the day.
See Personal Income, Spending, and Prices June Preview: After all the agony just an average quarter?
While the UK seems to slap restrictions before coronavirus cases leap, some US states are not as strict – or at least the outcomes are far from satisfying. The caseload has stabilized at a high rate of around 70,000 per day while daily deaths continue advancing, surpassing the 1,200 level on average.
And while the UK government is keen on providing relief and stimulus, American lawmakers continue tussling on the next steps while the unemployed are losing their special federal benefits. Optimism about progress in talks between Republicans and Democrats may help the dollar – but investors will believe it when they see it.
Nevertheless, the surge in GBP/USD may screech to a halt – at least on the last day of the month. Money managers may rush to adjust their portfolios and this phenomenon may favor a correction.
GBP/USD Technical Analysis
The Relative Strength Index on the four-hour chart is pointing to extremely overbought conditions, around 85. Pound/dollar appears over-stretched also on the daily chart. Cable broke above the uptrend channel that had accompanied it since last week, but this move may prove unsustainable.
The recent high of 1.3145 is the first level to watch. It is followed by 1.32, a high point in March. Further above, 1.3270 and 1.3330 are the next level to watch.
Support awaits at 1.3070, a line that played a role in February. The next cushion is 1.3010, a temporary resistance line on the way up. Next, 1.2970 and 1.2910 await it.
More Where next for the dollar, stocks and the US economy after downbeat data and the Fed
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
AUD/USD posts gain, yet dive below 0.6500 amid Aussie CPI, ahead of US GDP
The Aussie Dollar finished Wednesday’s session with decent gains of 0.15% against the US Dollar, yet it retreated from weekly highs of 0.6529, which it hit after a hotter-than-expected inflation report. As the Asian session begins, the AUD/USD trades around 0.6495.
USD/JPY finds its highest bids since 1990, approaches 156.00
USD/JPY broke into its highest chart territory since June of 1990 on Wednesday, peaking near 155.40 for the first time in 34 years as the Japanese Yen continues to tumble across the broad FX market.
Gold stays firm amid higher US yields as traders await US GDP data
Gold recovers from recent losses, buoyed by market interest despite a stronger US Dollar and higher US Treasury yields. De-escalation of Middle East tensions contributed to increased market stability, denting the appetite for Gold buying.
Ethereum suffers slight pullback, Hong Kong spot ETH ETFs to begin trading on April 30
Ethereum suffered a brief decline on Wednesday afternoon despite increased accumulation from whales. This follows Ethereum restaking protocol Renzo restaked ETH crashing from its 1:1 peg with ETH and increased activities surrounding spot Ethereum ETFs.
Dow Jones Industrial Average hesitates on Wednesday as markets wait for key US data
The DJIA stumbled on Wednesday, falling from recent highs near 38,550.00 as investors ease off of Tuesday’s risk appetite. The index recovered as US data continues to vex financial markets that remain overwhelmingly focused on rate cuts from the US Fed.