GBP/USD Forecast: Sterling has three reasons to stage a recovery, levels

Is football coming home? England has impressed fans and critics in its 4:0 victory over the weekend – even if Raheem Sterling did not score. The pound sterling has been benefiting from other reasons to rise. 

1) Reopening hopes: The UK recorded over 24,000 cases of COVID-19, most of them of the highly contagious Delta variant. However, as hospitalizations have risen only modestly and deaths remain depressed, Prime Minister Boris Johnson is set to remain on course with the July 19 reopening.

Will he change his mind like so many times in the past? Anything can happen in the next two weeks, but optimism is supporting the pound on Monday.

2) Data: Markit's Services Purchasing Managers' Index beat was upgraded from 61.7 to 62.4 points in June, reflecting robust growth. An upbeat outlook about Britain's largest sector is good news for sterling. 

3) Brexit truce: The EU and the UK and the decision to postpone a row over sausage trading between Great Britain and Northern Ireland until September. The lingering issues related to the divorce will likely haunt the pound for a long time, but probably not throughout the summer. 

What about the dollar? American traders are enjoying the long Independence Day weekend, but the does not mean the dollar is standing still. The greenback was sold off after the Nonfarm Payrolls report was published. While the headline gain of 850,000 beat estimates, wage growth was moderate at 3.6% YoY – and more importantly, the release served as an opportunity to unwind long dollar positions. 

However, the Federal Reserve is set to stay the course and continue moving toward tapering its bond-buying scheme – printing fewer dollars. It cannot dismiss such a considerable increase in the labor market. Nevertheless, the greenback may remain under pressure.

NFP  Analysis: Buy the dollar dip? Healthy jobs growth to keep Fed on tapering track

All in all, cable has room to rise on Monday.

GBP/USD Technical Analysis

Momentum on the four-hour chart has turned to the upside, providing hope for the bulls. Pound/dollar is tackling the 50 Simple Moving Average and has broken above a downtrend resistance line that capped it since mid-June. 

Some resistance awaits at 1.3840, which is where the 50 SMA hits the price. It is followed by 1.3870, which was a swing high last week. Further above, 1.3940 awaits GBP/USD. 

Some support awaits at 1.3820, the daily low. It is followed by 1.3750, a temporary cushion from last week, and finally the multi-month trough of 1.3730..

US Nonfarm Payrolls: June pleases everyone