GBP/USD Forecast: Sterling free-falls on Freedom Day, Delta risks drop under double bottom
- GBP/USD has tumbled to a three-month low amid growing covid concerns.
- Fears of a substantial Delta-related slowdown and US inflation could push the pair lower.
- Tuesday's four-hour chart is pointing to further falls for the pair.
When the Health Secretary catches covid, it is easy to see that something is wrong. Sajid Javid has been one of the most recent Brits to test positive for coronavirus – roughly 50,000 daily cases are reported in the UK, and hundreds of thousands are called to self-isolated. The system has been "pinging" many who have come in close contact with infected individuals.
This "pingdemic" as the British press dubbed it threatens the normal work of shops and supermarkets just as the country is supposed to celebrate "Freedom Day." Almost all covid-related regulations have expired at midnight, opening the door to a return to normal. However, isolations, high cases – and the risk of an explosion of infections, hospitalizations and deaths are weighing heavily on sterling.
Source: FT
The pound has also been hit by Jonathan Haskel, an external member of the Bank of England's Monetary Policy Committee. Contrary to some of his hawkish colleagues, Haskel stated that a tight policy is not the right one at this time. He argued that the risk of preemptive tightening is worse than a temporary period of above-target inflation.
That stance by Haskel contrasts growing fears of US price rises. The University of Michigan's preliminary Consumer Price Sentiment figures for July showed an increase in inflation expectations – a gauge that is closely followed by the Federal Reserve. Fed Chair Jerome Powell said that price rises are "uncomfortably high" in testimony last week.
American covid cases are moving up as well, especially in undervaccinated areas. However, the dollar is a safe-haven currency that benefits in times of trouble.
Overall, cable seems vulnerable to further falls.
GBP/USD Technical Analysis
Pound/dollar has hit the lowest in three months and suffers from downside momentum on the four-hour chart. It also trades under the 50, 100 and 200 Simple Moving Averages and the Relative Strength Index is just above 30 – outside oversold conditions.
Support awaits at the psychologically significant 1.37 level, which is also the daily low. The next cushion is critical – the double-bottom of 1.3670, recorded in the spring. It is followed by 1.3620.
Some resistance is at 1.3730, the previous July low, and then by 1.3750 and 1.3785.
Delta Doom is set to storm America, the dollar could emerge as top dog
Premium
You have reached your limit of 3 free articles for this month.
Start your subscription and get access to all our original articles.
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.
