- GBP/USD remains subdued amid stronger US Dollar.
- Pound Sterling suffers amid rising Corona cases and poor risk sentiment.
- UK government can impose another lockdown if the disease curve doesn’t invert.
The most important factor, which is now affecting the GBP/USD analysis, is the infusion of huge amounts into the American economy under the stimulus programs from the Fed and the US government. Moreover, Fed’s tightening policy coupled with sour risk sentiment keep the Greenback stronger at the moment.
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However, now the Pound Sterling has been declining for quite a long time, but what could be the reasons for its fall? From our point of view, the Pound Sterling is falling due to the increased risks of a new lockdown in the Kingdom, as well as a new round of the economic crisis.
We do not know what the British government, headed by Boris Johnson, is guided by when it completely lifts quarantine restrictions when the number of new cases of the disease is growing in the country every day. Unfortunately, it seems that most of the market participants do not understand this either.
Even considering the high rates of vaccination in the country, 55k cases of the disease per day are very high. Recall that the maximum value at the peak of the third wave was 68k. So, it turns out that now the incidence rates are already very close to the peak for the entire period of the pandemic.
But the British government is quite calmly canceling all quarantine measures, believing that the vaccination of the entire adult population will be completed and the virus will not spread further shortly.
From our point of view, this is a rather strange decision, perhaps even negligent. How can we not recall the words of Dominic Cummings, a former adviser to Boris Johnson, who a couple of months ago criticized the entire British government, calling it completely incompetent because of his actions to confront the pandemic in 2020! So, it seems that the current actions of the British authorities are also not distinguished by particular foresight.
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GBP/USD technical analysis: Bears to make new lows
After breaking all the support levels without sympathy, the GBP/USD pair is now trying to crack yesterday’s low zone at 1.3660 just ahead of the London session. So, it looks like the fresh low formation is imminent today. The key moving averages are pointing to the downside. Apparently, there is no support below at the moment. The volume reading is also supportive of bearish momentum. So, any upside pullback will be considered a correction and an opportunity to sell.
Support levels:
S1 – 1.3672
S2 – 1.3641
S3 – 1.3611
Resistance levels:
R1 – 1.3702
R2 – 1.3733
R3 – 1.3763
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Saqib Iqbal
