GBP/USD has room to advance on Tuesday with high uncertainty about the next moves

GBP/USD is trading closer to 1.39. In the view of FXStreet’s Analyst Yohay Elam, sterling is set to rise on UK reopening and (temporary) dollar decline.

US inflation figures stand out, and there is room for disappointment

“UK Prime Minister Boris Johnson has urged the public to remain vigilant when the economy reopens on July 19 but refrained from making any changes to policy despite a rise in COVID-19 cases. Britain is well-advanced in its vaccination drive, with over 68% of the population fully protected and investors cheer for this reopening.” 

“Will sterling continue benefiting from the resumption of economic activity? The pound will likely react only to a change in course by the government or a new assessment from the Bank of England. The BoE's freshly released Financial Stability Report notes improved economic prospects but lists covid as a risk.”

“The highlight of the day for GBP/USD is America's inflation report. The headline Consumer Price Index is set to edge down from 5% in May to 4.9% in June, while Core CPI – which tends to have more market impact – is forecast to advance from 3.8% to 4%. However, the sharp drop in lumber prices and the crash in lumber prices point to some cooling.” 

“The more significant risk to dollar bears comes from America's Delta spread. The greenback is a safe-haven currency that receives a boost in times of trouble. If the world's largest economy lifts its foot from the accelerator, the entire world hits the brakes.”

“Significant resistance awaits at 1.3910, which held GBP/USD down in recent days. It is followed by 1.3940, a cap from late June, and then by 1.40.”

“Support is at 1.3840, the weekly low, followed by 1.3785, 1.3750 and 1.3735 – the latter being a multi-month low.”