GBP/USD: Bulls attack 1.3700 as UK searches covid variant from South Africa

GBP/USD retreats from an intraday high of 1.3698 to currently around 1.3685, up 0.20% on a day, while heading into Tuesday’s London open. Although market optimism favored the pair’s uptick from the short-term support line, bulls need extra fuel to cross the multi-month top marked the previous day.

Also challenging the quote’s further upside are fears of the coronavirus (COVID-19) variant first found in South Africa. The Sky mentions 11 latest cases of South African strain found without any travel history, totaling 105, which in turn pushes the Tory authorities to the mass testing drive when they’re already boosting vaccinations.

On the same line, Brussels also raise bars for foreign travels, especially when they’re battling the vaccine need. “The European Union toughened its restrictions on visitors from outside the bloc on Monday, with travelers only allowed to enter freely from countries with very low numbers of cases and almost none of the more virulent variants,” said The Guardian.

Even so, UK PM Boris Johnson praised the country’s vaccine drive and stays optimistic over further flattening of the virus curve while backing early open schools. Also on the positive side were comments from the Financial Times (FT) suggesting UK Chancellor Rishi Sunak’s readiness to keep Tory manifesto of “triple tax lock” during the March budget.

On a broader scale, the receding retail rush towards silver and equities joined US President’s push for stimulus. Also boosting the mood could be China’s readiness to refresh ties with America.

Against this backdrop, stock futures in the US and the UK print mild gains while those from Asia remain strong.

Looking forward, GBP/USD traders will have to pay close attention to macros amid a light calendar. In doing so, social media chatters and stimulus updates, coupled with virus and vaccine news, should be followed seriously. Given the recent risk-on mood, hints of a further worsening of the virus in the UK may trigger the much-awaited pullback of the cable. However, it’s the week comprising the US employment data and hence trading may remain lackluster ahead of the event.

Technical analysis

Unless declining back below the three-wee-old ascending trend line, currently around 1.3655, GBP/USD buyers may keep targeting the 1.3755-60 resistance area on the table.