GBP/USD: Another bond auction and infrastructure spending to switch dollar’s direction

GBP/USD has been benefiting from falling US bond yields but the cable is far from safety as another US bond auction may trigger a reversal, Yohay Elam, an Analyst at FXStreet, reports.

See:  GBP/USD to test the recent high at 1.4017 – Credit Suisse

Key quotes

“Uncle Sam is now selling 30-year bonds – which may already see weaker demand. An increase in returns on US debt linked to mortgages may send shivers down investors’ spines and boost the greenback.”  

“President Joe Biden has yet to sign the $1.9 trillion covid relief package approved by Congress, and new plans have already surfaced. The administration is reportedly examining a $2.5 trillion infrastructure bill, which may receive some Republican support for a change. If additional headlines lay the ground for further spending, that would also push yields and the dollar higher.”

“Pound/dollar is heading towards the 100 Simple Moving Average on the 4-hour chart, which converges with the daily high of 1.3965. Momentum is to the upside and the pair already topped the 50 SMA. All in all, bulls are in the lead, but resistance remains significant.”  

“Above 1.3965, the next hurdle is 1.4015, followed by 1.4050 and 1.4075.”  

“Some support awaits at 1.3925, a swing high from earlier this week, followed by 1.3850, 1.3830 and 1.3775 – a strong support line.”