- GBP/USD has been benefiting from the upbeat market mood which weighs on the dollar.
- Robust UK job figures and less fear from the virus strains is boosting sterling.
- Tuesday's four-hour chart is showing that cable has entered overbought conditions.
Can technicals defy fundamentals and pull cable back down? It seems that the answer is no, as the pound has plenty of reasons to rise while the dollar has reasons to tumble down.
The latest news from the UK has been upbeat – Britain's Unemployment Rate dropped to 4.8% in March, beating estimates and showing that the economy was strong when the reopening was just in its infancy. The more recent Claimant Count Change for April also exceeded expectations by showing a fall of 15,100.
Several restrictions were loosened on Monday, amid fears that the variant first found in India is spreading fast. Nevertheless, new studies showed that existing vaccines cope with this new variant efficiently. The UK is well-advanced in immunizing its population, with 35-year olds now eligible for a jab.
Even the Brexit front has seen some upbeat developments – Britain made new offers to resolve trade issues with Northern Ireland.
On the other side of the pond, the dollar has been suffering from the Federal Reserve's insistence that rising inflation is transitory. Fed Vice-Chair Richard Clarida clarified that this is the bank's stance despite the bump up in the Consumer Price Index in April and the surge in inflation expectations reported by the University of Michigan's Consumer Sentiment Index.
The Atlanta Fed President Raphael Bostic is set to speak later in the day. If he does not deviate from the bank's current stance, it is hard to see the dollar recovering.
Close by in Washington, the White House will receive counter-proposals from Republicans, which will likely fall substantially short of President Joe Biden's ambitions for a $4 trillion spend and tax package. Concerns of overheating are unlikely to arise from the GOP's proposals.
Overall, GBP/USD has more reasons to rise than fall.
GBP/USD Technical Analysis
Pound/dollar has entered overbought territory according to the Relative Strength Index (RSI) on the four-hour chart. It has topped the 70 level. On the other hand, momentum is to the upside and the currency pair is also trading above the 50, 100 and 200 Simple Moving Averages.
Immediate resistance is at 1.4215, which is the daily top and the highest since February. Further above, the 2021 peak of 1.4240 awaits bulls. Beyond that point, the upside target is the 20218 peak of 1.4375.
Some support awaits at 1.4160 which was the previous high point in May. It is followed by 1.4105, 1.4075 and 1.4050.
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.
Follow us on Telegram
Stay updated of all the news
EUR/USD stays below 1.0900 as Q1 comes to an end
EUR/USD has lost its traction and declined below 1.0900 in the American session on Friday. Quarter-end flows seem to be allowing the US Dollar find some demand but the risk-positive market environment seems to be limiting the pair's downside ahead of the weekend.
GBP/USD trades below 1.2400, looks to post weekly gains
GBP/USD has edged lower after having tested 1.2400 earlier in the day but remains on track to end the third straight week in positive territory. The upbeat mood remains intact after soft PCE inflation data from the US, making it difficult for the US Dollar to continue to gather strength.
Gold tries to stabilize near $1,980 following earlier spike
Gold price has returned to the $1,980 area following a spike above $1,987 with the initial reaction to lower-than-expected PCE inflation figures from the US. Meanwhile, the benchmark 10-year US Treasury bond yield stays in the red near 3.5%, providing support to XAU/USD.
Will Dogecoin price pull an XRP and rally 60% next week?
Dogecoin price has been in a tight range bound movement since November 22. The recent recovery above the range low looks promising and hints at an explosive move for next week.
Week ahead – Nonfarm payrolls to set the tone for US dollar
With the banking turmoil receding, market participants will turn their attention back to economic releases. The spotlight will fall on the US employment report.