GBP/USD: Sterling's misery to sink cable towards the 1.3565 mark

GBP/USD has hit a fresh five-month low as worries about the Delta covid variant rise. As FXStreet’s Analyst Yohay Elam notes, bears eye the 1.3565 level.

See – GBP/USD: Sterling slumps lower, holding above 1.3640 is key to see a consolidation – Commerzbank

Fundamentals point to further falls

“GBP/USD's tumble below the 1.3670 double-bottom was also exacerbated by the risk-off mood in markets, which favors a light to the safety of the US dollar. The delta strain is spreading rapidly all over the world, causing investors a rethink the economic recovery. The dollar's breather early on Tuesday and cable's inability to take advantage of it is a bearish sign. A currency pair that cannot recover is set to tumble.” 

“Advanced vaccination campaigns in the US and especially the UK should keep hospitalizations and deaths at low levels – this wave is far less deadly than the previous ones. However, the suffering has yet to peak – it is still not the time to buy the Delta dip.” 

“Sterling was also hit by dovish comments from Monetary Policy Committee member Jonathan Haskel, who prefers refraining from tightening. Brexit issues continue weighing on the pound. The EU and the UK remain at loggerheads around the Northern Irish protocol.”

“Immediate support is at 1.3627, the fresh five-month low. The next cushion is at 1.3610, a support line from early in the year. The critical level to watch is 1.3565, which is the February trough. Further down, 1.3450 awaits GBP/USD bears.”

“The broken double bottom of 1.3670 switches to resistance. It is followed by 1.3730, 1.3750 and 1.38, all levels that provided support before the recent fall.”