GBP/USD: Less and less likely UK's reopening to send cable below 1.4080, US data eyed

GBP/USD has briefly breached critical support at 1.4080 as growing Brexit acrimony and virus concerns strain sterling. US inflation figures are set to rock markets while Thursday's four-hour chart is pointing to further losses, Yohay Elam, an Analyst at FXStreet, briefs.

See – US CPI Preview: Forecasts from eight major banks for critical May inflation

Bears are gaining ground, but do not have full control

“The highly anticipated ‘Freedom Day’ will likely be postponed from June 21 to early July. Economic damage from the delayed return to normal is joined by threats of quota tariffs from the EU. Brussels and London remain at loggerheads over the implementation of the Northern Irish protocol and tensions are mounting.”

“Will outside intervention help calm Brexit tensions? US President Joe Biden – who says he is 5/8 Irish – will reportedly pressure UK Prime Minister Boris Johnson to settle the remaining issues, in order to preserve the Good Friday peace agreement in the Emerald Isle. However, the heads of state at the G-7 Summit in London have greater topics to tackle.” 

“US Consumer Price Index figures for May are set to increase by 4.7% YoY and a leap above 5% could boost the dollar on elevated expectations for the Federal Reserve to buy fewer bonds. However, the greenback already gained ground ahead of the release. That implies a potential ‘buy the rumor, sell the fact’ response that may salvage GBP/USD from falling further down.”

“In its dip under 1.4080, cable temporarily breached the 200 SMA, but managed to bounce. Below 1.4080, the next levels to watch are 1.4055 and 1.4010, which supported the pair in May.”

“Some resistance is at 1.4110, which provided support earlier in the week, and then the recent high of 1.4190.”