- GBP/USD has been on the back foot amid concerns that the UK reopening is delayed.
- Friction around Brexit is also pressuring the pound.
- Cable has lost two SMAs on the four-hour chart, adding to the bearish sentiment.
Cable is at the crossroads – where will it go from here? After several sluggish sessions of range trading, there are three reasons to expect a slide in GBP/USD.
1) Freedom Day, postponed?
Concerns about the Delta variant of COVID-19 have been mounting for several weeks. This strain, first identified in India, is thought to be 40% more transmissible than the already fast-spreading Alpha, or Kent variant. Moreover, according to new studies, it may cause a wider variety of symptoms.
Prime Minister Boris Johnson insisted that the fourth and last stage of Britain's reopening is on course to proceed on June 21, but sounded more cautious in his most recent remarks. He was probably working on a Plan B. According to the Times, the government is mulling a delay of two weeks in the reopening, using the extra time to vaccinate as many people as possible.
The UK is well-advanced in its immunization effort and is now calling 25 to 29-year-olds to get inoculated. While two weeks is far from dealing a deadly blow to Britain's economic recovery, it risks turning into a larger setback.
2) Brexit is back
The UK officially left the EU in early 2020 and the transition period ended early this year, but leftovers linger. The most contentious topic remains trade around Northern Ireland and the implementation of the trade protocol.
London seems to refuse to acknowledge it accepted a customs border between Great Britain and NI, extending the period without checks. However, Brussels is becoming furious. Maroš Šefčovič, the bloc's Brexit commissioner, wrote that "If the UK takes further unilateral action … the EU will not be shy in reacting swiftly, firmly and resolutely to ensure that the UK abides by its international law obligations"
This acrimony not only risks minuscule trade around the territory but further agreements between the EU and the UK on the regulations regarding the services industry. For sterling, the mere reappearance of Brexit is problematic and weighs on the currency.
What about developments in America? The disappointing Nonfarm Payrolls figures and Treasury Secretary Janet Yellen's upbeat comments on interest rates seem to have offset each other. While Tuesday's JOLTs job openings report is of interest, the main event of the week – inflation data – is only on Thursday, leaving the focus for GBP/USD on British events.
3) Technicals leaning lower
When a currency pair trades in a limited range, it is hard to find substantial trends. Nevertheless, the four-hour chart consists of clues that the next move is down. GBP/USD slipped below the 50 and 100 simple moving averages and momentum has slipped lower.
Support awaits at 1.1.4110, which provided support on Friday. The next cushion is 1.4080, which is June low. It is followed by 1.4050 and 1.4010.
Resistance awaits at 1.42, which held GBP/USD down in early June, and then 1.4220, a cap from late May, ahead of the 2021 peak of 1.4250.
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 gains ground on hawkish RBA, Nonfarm Payrolls awaited
The Australian Dollar continues its winning streak for the third successive session on Friday. The hawkish sentiment surrounding the Reserve Bank of Australia bolsters the strength of the Aussie Dollar, consequently, underpinning the AUD/USD pair.
USD/JPY: Japanese Yen advances to nearly three-week high against USD ahead of US NFP
The Japanese Yen continues to draw support from speculated government intervention. The post-FOMC USD selling turns out to be another factor weighing on the USD/JPY pair. Investors now look forward to the crucial US NFP report for a fresh directional impetus.
Gold lacks firm near-term direction, remains stuck in a range ahead of US NFP
Gold price struggles to gain any meaningful traction amid mixed fundamental cues. The Fed’s less hawkish outlook drags the USD to a multi-week low and lends support. Bets for a delayed Fed rate cut and a positive risk tone cap gains ahead of the US NFP.
Solana price pumps 7% as SOL-based POPCAT hits new ATH
Solana price is the biggest gainer among the crypto top 10, with nearly 10% in gains. The surge is ascribed to the growing popularity of projects launched atop the SOL blockchain, which have overtime posted remarkable success.
NFP: The ultimate litmus test for doves vs. hawks
US Nonfarm Payrolls will undoubtedly be the focal point of upcoming data releases. The estimated figure stands at 241k, notably lower than the robust 303k reported in the previous release and below all other readings recorded this year.