- GBP/USD kicked off the new week on a positive move and jumped back above the 1.3900 mark.
- The upbeat market mood undermined the safe-haven USD and provided a goodish lift to the pair.
- The gradual reopening of the UK economy benefitted the British pound and remained supportive.
A combination of supporting factors assisted the GBP/USD pair to regain positive traction on the first day of a new week and move back above the 1.3900 mark. As investors looked past Friday's blockbuster US NFP report, the upbeat market mood prompted some selling around the safe-haven US dollar. The British pound was further supported by the highly successful vaccination distribution program in the UK and the gradual reopening of the economy. In fact, UK Prime Minister Boris Johnson announced the second phase of lockdown easing on Monday and confirmed that nonessential stores will be allowed to reopen from April 12.
Meanwhile, the USD remained depressed and failed to gain any respite from upbeat US ISM Services PMI, which jumped to 63.7 in March from 55.3 previous. This was well above consensus estimates and added to the narrative of a relatively faster US economic recovery from the pandemic. The data, however, did little to impress the USD bulls or hinder the pair's intraday positive move. Nevertheless, the pair ended near the top end of its daily trading range and climbed to over two-week tops during the Asian session on Tuesday.
The ongoing retracement slide in the US Treasury bond yields held the USD bulls on the defensive, which, in turn, extended some support to the major. That said, a softer tone around the US equity futures drove some haven flows towards the greenback and might keep a lid on any meaningful upside for the pair, at least for the time being. In the absence of any major market-moving economic releases, either from the UK or the US, the USD price dynamics will continue to play a key role in influencing the pair's intraday momentum.
Against the backdrop of the upbeat US economic outlook, US President Joe Biden's over $2 trillion infrastructure spending plan has been fueling expectations for an uptick in US inflation. This, in turn, has raised doubts that the Fed will retain ultra-low interest rates for a longer period, which should limit any meaningful slide in the US bond yields. This suggests that the path of least resistance for the USD remains up and the pair's ongoing positive move runs the risk of fizzling out rather quickly.
Short-term technical outlook
From a technical perspective, the overnight momentum and acceptance above the 38.2% Fibonacci level of the 1.4243-1.3671 downfall support prospects for additional gains. The constructive set-up is reinforced by the fact that technical indicators on hourly/daily charts have been gaining positive traction. Hence, some follow-through buying has the potential to lift the pair further towards the 50% Fibo. level, around the 1.3960-65 region, en-route the key 1.4000 psychological mark.
On the flip side, sustained weakness below the 1.3900 mark (38.2% Fibo. level) might prompt some technical selling and drag the pair back towards the 1.3840-35 horizontal support. This is followed by the 23.6% Fibo. level near the 1.3800 mark, which if broken decisively will negate any near-term positive bias. The pair might then turn vulnerable to accelerate the fall towards intermediate support near the 1.3740 horizontal level before eventually dropping to the 1.3700 mark and multi-week lows, around the 1.3670 region touched on March 25.
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.