The GBP/USD pair extended its recent strong bounce from its lowest level since early February and returned above 1.3900 on Wednesday. The pair saw some selling during the day and fell to 1.3840 despite a combination of factors that helped contain further losses. The British pound was supported by the downward trend in delta variability and comments from leading British epidemiologist Neil Ferguson that the pandemic could be over in just a few months. The United Kingdom is scrapping quarantine rules for fully vaccinated travelers from the European Union and the United States. In addition, the emergence of fresh selling in the US dollar helped this currency pair.
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The dollar struggled to maintain its modest early earnings,
Instead, it faced strong supply in reaction to Fed Chairman Jerome Powell’s dovish tone in the press conference following yesterday’s FOMC meeting. The US central bank announced its monetary policy decision and is optimistic about the economy, acknowledging that the economy has made progress towards maximizing employment and stabilizing prices. However, Powell emphasized that they were somewhat far from making much progress and was also cautious in limiting asset purchases. He said policymakers have discussed some details, but it will take a few more meetings. The difference in tone between the political announcement and Powell’s comments, along with a sharp drop in US Treasury yields, weighed heavily on the dollar. Indeed, US 10-year Treasury yields fell near five-month lows and kept the dollar bulls on the defensive.
Thursday’s reading is the annual GDP dynamics from the US
At the same time, we will get acquainted with the data on the number of new unemployed people. However, all readings lose relevance as investors’ mood was affected by the Federal Reserve’s statement on Wednesday. Early estimates are expected to show that growth in the world’s largest economy accelerated 8.6% year-on-year in the April-June quarter. In addition, US bond yields will play a major role in influencing the dynamics of the value of the US dollar. From a technical point of view, the dynamics beyond the 1.3900 level confirmed the short-term bullish breakout of the resistance marked by the 50% Fibonacci level with the low of 1.4249-1.3572.
Given that technical indicators on the daily chart are gaining traction,
Everything seems to be heading towards reclaiming the key psychological level at 1.4000. The latter corresponds to the 61.8% Fibonacci. A level that, if decisively cleared, should pave the way for another short-term rally. Another important obstacle is near the 1.4000 halving, and bulls above it are likely to try to regain the 1.4100 level.
On the other hand, 1.3900 now appears to protect a direct drop around the 1.3840 area,
Before 38.2% of the Fibonacci level. More sales have the potential to pull the pair further towards 1.3800 which, if broken, could lead to some technical selling. The pair can then accelerate the decline towards 1.3730 confluence support which includes 23.6% Fibonacci. The 200-day simple moving average is very important. Continued weakness below the aforementioned support will shift the bias in favor of the bears.
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