GBP/USD Forecast: Pound at the mercy of bond buyers, bears ready to take over

GBP/USD has been holding onto its recovery as US yields remain off the highs.
A critical US Treasury auction and inflation figures are set to move markets.
Wednesday's four-hour chart is showing bears are in the lead.

Yohay Elam FXStreet

"Trust your gut" – the words of former Good Morning Britain's Piers Morgan regarding the royal scandal are controversial but may resonate with many cable traders that follow their instincts when the technical picture is murky like now. However, fundamentals provide a clearer path of action that requires no reliance on inner organs.

US Treasury yields remain the overwhelming driver of the dollar and all currency pairs including the greenback. The next move for ten-year bonds – the global benchmark – heavily depends on Wednesday's auction of such debt. With yields hovering around 1.55% at the time of writing, it would be fair to say that a climb above 1.60% is dollar positive and a drop under 1.50% is adverse for the greenback.

US 10-Year Treasury Auction: Interest rates return to center stage

Ahead of that fateful offering of debt, the House is set to give the green light to additional government expenditure. The lower chamber is set to pass the Senate's modified version of President Joe Biden's $1.9 trillion covid relief package. After he signs it into law, the funds are set to flow to states, municipalities, the unemployed, and households via stimulus checks.

Earlier on, an updated view on inflation is eyed. The Consumer Price Index probably edged higher in February, albeit not to alarming levels. Any uptick in inflation may support the greenback.

US CPI February Preview: A perfect storm in the making?

What about the British side of the equation? While UK papers are all covering the royals, the vaccination campaign continues at full force and keeps supporting sterling. However, cable's main driver remains the dollar.

GBP/USD Technical Analysis

Momentum on the four-hour chart has turned positive and the currency pair has settled above the 200 Simple Moving Average. However, it remains capped by the 50 and 100 SMAs. All in all, the picture is mixed.

Support awaits at 1.3850, where the 200 SMA meets the daily low. It is closely followed by 1.3830, a cushion from February, and by 1.3775, March's low.

Immediate resistance awaits at 1.39, the daily high, followed by the weekly top of 1.3925, and the 100 SMA at 1.3950.

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

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.

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