GBP/USD kicked off the new week on a positive move and jumped back above the 1.3900 mark. The set-up favours bulls but an upbeat US economic outlook might cap gains, FXStreet’s Haresh Menghani reports.
The USD price dynamics will continue to play a key role in influencing cable’s intraday momentum
“Against the backdrop of the upbeat US economic outlook, US President Joe Biden’s over $2 trillion infrastructure spending plan has been fueling expectations for an uptick in US inflation. This, in turn, has raised doubts that the Fed will retain ultra-low interest rates for a longer period, which should limit any meaningful slide in the US bond yields. This suggests that the path of least resistance for the USD remains up and the pair’s ongoing positive move runs the risk of fizzling out rather quickly.”
“The constructive set-up is reinforced by the fact that technical indicators on hourly/daily charts have been gaining positive traction. Hence, some follow-through buying has the potential to lift the cable further towards the 50% Fibo. level, around the 1.3960-65 region, en-route the key 1.4000 psychological mark.”
“Sustained weakness below the 1.3900 mark (38.2% Fibo. level) might prompt some technical selling and drag the pair back towards the 1.3840-35 horizontal support. This is followed by the 23.6% Fibo. level near the 1.3800 mark, which if broken decisively will negate any near-term positive bias. The GBP/USD pair might then turn vulnerable to accelerate the fall towards intermediate support near the 1.3740 before eventually dropping to the 1.3700 mark and multi-week lows, around the 1.3670 region touched on March 25..”
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