August 14, 2022
  • August 14, 2022

GBP / USD technical analysis: impacted by the reopening of the United Kingdom

By on May 18, 2021 0

Over the past week, bears tried to push GBP / USD to break above the 1.4000 level, but the dollar retreated after disappointing US retail sales figures, and the pair closed around resistance. from 1.4100. The pair’s gains did not break through the resistance level of 1.4166. The US dollar gained momentum against the rest of the major currencies. The gains came after US inflation more than doubled the Fed’s 2% target for April. Inflation data appears to have sparked speculation that the Fed may cut its quantitative easing (QE) program or raise interest rates earlier than expected so far, which would push a dollar higher. strong and higher bond yields later.

The dollar was unable to hold on to the gains with disappointing US retail sales figures, which allowed the pound to find support above the 1.40 level in the middle of last week. Commenting on the performance, UOB strategist Kwik Sir Liang said: “The bias has turned to the upside, but GBP / USD is expected to close above its high of 1.4240 since the start of the year before. that a sustainable rally is not expected. ”

However, investors and the British Pound are interacting with the growing line of domestic and international developments that threaten to lift short-term price pressures and extend the time when the market can be sure of the likely timing of any Fed move. increase interest rates. For his part, Stephen Gallo, Forex analyst at BMO Capital Markets, said, “The dollar is not far from the tipping point; We believe that the turning point for the US dollar will be another point of decline against the euro and the pound if the Fed’s “ pessimism ” in the face of rising inflationary pressures leads to a further decline in prices. actual dollar prices (or whether bonds significantly outperform debt). “

Overall, the prolonged uncertainty may cause investors to remain reluctant to ditch the greenback for too long, which in turn could limit further gains for the GBP / USD pair for now. For its part, the Fed has stressed that it is unlikely to adjust its policy parameters until “significant further progress” has been made towards labor market reform and pledged to keep costs down. close to zero for inflation to spend sufficient time above the 2% level.

Meeting the Fed’s jobs and inflation targets seemed less likely anytime soon when April’s non-farm payrolls missed market expectations by a mile last week, helping to push down prices. US bond yields and profit from the pound against the dollar in GBP / USD in recent days. The pound sterling will now face growing economic risks in its country in the days and weeks to come, including government concerns over a new strain of coronavirus.

Technical analysis of the pair:

The stability of the GBP / USD currency pair above the psychological resistance of 1.4000 continues to strengthen the bullish performance. The pair’s gains last week, reaching their highest level in two and a half months, added to that momentum. The pound’s gains could suffer a setback: Growing fears of the emergence of a new strain of coronavirus threatening UK government plans to reopen the country’s economic activity on a schedule supported by the Great’s advanced vaccinations -Brittany against the epidemic. On the daily chart, the bulls’ next target will be the resistance level of 1.4240.

On the downside, bears will have better control over performance in case the currency pair moves towards the support level of 1.3880. The currency pair is not expecting any significant UK or US economic data today.