GBP/USD: Dead-cat bounce? Hard to see sterling extending its recovery

GBP/USD has been recovering after the UK reported higher than expected inflation figures. The most recent move could be a dead-cat bounce. Fed Chair Powell's testimony is left, right and center after US CPI, soft bond auction supported the dollar, FXStreet’s Analyst Yohay Elam briefs.

The next moves almost exclusively depend on Powell

“Jerome Powell, Chair of the Federal Reserve, holds the key to the next moves. A dovish focus would imply a delay in the bank's tapering of its $120 billion/month bond-buying scheme. On the other hand, Powell could acknowledge the recent robust Nonfarm Payrolls report and see higher prices as more persistent, thus raising the chances for a taper announcement. That would boost the greenback.”

“The Delta covid variant continues spreading on both sides of the pond. Cases have topped 34,000 daily in the UK and have more than doubled in the past fortnight in the US. Even though the UK is set to reopen on Monday, doubts persist about such a move's sustainability. If cases continue rising in America, it could boost the dollar as a safe haven.”

“Support awaits at the daily low of 1.38, followed by 1.3750 and 1.3730, which have served as support lately.”

“Some resistance is at 1.3840, which held cable down last week. It is followed by the stubborn 1.3905 line which is the weekly high. Further above, 1.3935 is the next level to watch.”