GBP/USD has been on the rise amid dollar weakness and Britain’s vaccination campaign. In the view of FXStreet’s Analyst, sterling braces for the rally’s side effects, a downside correction.
“Work on the next US stimulus bill – the main dollar driver – is currently going on quietly, but perhaps not for long. That may change cable’s dynamics.”
“Federal Reserve Jerome Powell is set to address the labor market, which continues struggling according to the latest figures. Powell may provide a timely reminder that the world’s largest economy needs more help – and his call on lawmakers to act may refocus minds on stimulus. In turn, yields could begin rising, making the greenback more attractive.”
“In the UK, coronavirus cases and deaths continue falling, while the vaccination campaign continues at full speed – supporting the pound. Nevertheless, while sterling may be able to weather a potential greenback comeback better than some of its peers, it is not immune.”
“The Relative Strength Index on the 4-hour chart is above 70, reflecting overbought conditions and signaling a downside correction.”
“Support awaits at the round 1.38 level, followed by the former 2021 peak of 1.3750, which is a critical cushion. The new 2021 peak of 1.3855 is the immediate line of resistance. It is followed by 1.39, and then by the all-important 1.40 level – all last seen in 2018.”