GBP/USD consolidates below yearly highs, focus is on 1.3980

  • Cable has rallied over 4% in 2020 due to a combination of USD weakness, BoE dialling back on rates and the vaccine roll-out. 
  • GBP/USD bears target the 50% mean reversion mark at 1.4036 ahead of the 1.3980s.

As per the prior analysis, GBP/USD Price Analysis: Bulls coming up for their last breath?, cable rallied in a fresh daily impulse from the support structure.

However, the price extended in five consecutive days of higher highs and lows, coming within touching distance of 1.43 today and sailed through anticipated resistance in the psychological 1.40/41 areas. 

The pound has been the best-performing G10 currency this year. Cable was up some 4% for the year so far while the pound was 3.2% higher vs the euro.

A combination of the Bank of England pushing back on the need for negative rates, USD weakness and a faster and more effective COVID-19 vaccine rollout has spurred on investment back into sterling.  

Equally, the relief of avoiding a no-deal Brexit and fewer immediate complications at the start of the year pertaining to the new regulations has been positive for the British currency. 

''There is speculation in the market that some of the interest in the pound this year has been drawn from pent-up demand,'' analysts at Rabobank explained. 

''There is evidence that investment levels in the UK were lower than they would have been otherwise in recent years due to political uncertainty related to Brexit.''

Moreover, the analysts remind that ''any relief on the Brexit trade agreement announcement should be tempered by the fact that the deal agreed was not comprehensive or an improvement on market expectations.''

Overall, the analysts forewarn that there could still be stumbling blocks on the road ahead related to Uk politics and Brexit, concerning, In particular, the Northern Ireland issue as well as the Scottish elections in May.

Additionally, considering the PM's Boris Johnson's cautious relaxation of the lockdown, some restrictions may remain in place into the summer months and given how fluid the crisis is, covid could still give the UK bulls the run-around.

All things weighed, the UK economy was one of the worst affected by the virus, and while that leaves plenty of room for an economic bounce back, under the bonnet of any economic growth is a very damaged engine. 

Therefore, in the absence of any new economic data that would prove otherwise, following such longevity in the recent rally, the focus, if only technically, should be on the downside. 

GBP/USD technical analysis

The path of least resistance, having cleared whatever liquidity had accumulated around the 1.40/41 area, opens the way to a 61.1% Fibonacci retracement, 1.3987, of the length of the latest daily bullish impulse. 

Daily chart

The first hurdle, however, is the 50% mean reversion mark at 1.4036, which has a confluence with the 19th Feb highs.

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.

Feed news

Are you new to trading or have been trading for a while and you feel stuck?

Try with us!
Become Premium!

Latest Forex News

Latest Forex News

Editors’ Picks

EUR/USD: Demand for high-yielding assets likely to continue

The EUR/USD pair reached1.2171 last Friday, its highest since March 1, closing the week a few pips below such a high. Wall Street reached all-time highs, while US government bond yields plunged. EUR/USD is overbought but still has room to extend its advance.


GBP/USD: Scottish election’s result may take its toll on pound

 The British Pound took advantage of the broad dollar’s weakness, and GBP/USD  surged to 1.4005, retreating just modestly ahead of the close to settle around 1.3990. GBP/USD is technically bullish, could advance once above 1.4015 resistance.


Gold could target 200-day SMA

Gold extended its rally after surging above $1,800 on Thursday. During the first half of the week, the XAU/USD pair struggled to rise above $1,800 and fluctuated in a horizontal channel. The next target on the upside aligns at $1,850.

Gold News

Judge reaffirms order SEC must produce documents on Bitcoin, Ether and XRP in Ripple case

Ripple's victory granted the firm access to the SEC's documents on the three leading cryptocurrencies. The regulatory agency recently denied the possession of these documents.

More Dogecoin News

S&P 500 and Nasdaq: Can the Fed pump anymore after weak jobs report

Well, that was an interesting jobs report. Not too many people were forecasting that one. Just in case you missed it NFP were forecast to come in around the 1 million jobs gained but instead the US only added 266k.

Read more