GBP/USD approaches 1.3700 as the US dollar drops further
Improvement in risk sentiment weighs on US Dollar.
GBP/USD rising after four consecutive days of declines.
The GBP/USD rose further during the American session and printed a fresh daily high at 1.3694. Cable is hovering around the daily high with the positive tone intact, on the back of a sharp correction of the US dollar.
The greenback accelerated the decline during the last hours as equity prices rose further. In Wall Street, the Dow Jones is up by 0.80%, and the Nasdaq gains 0.50%. Higher US yields are not helping the dollar so far. The US 10-year yield is up 5% at 1.28%.
From a technical perspective, GBP/USD is about to test the 200-day moving average that is at 1.3699. The area around 1.3700 is the immediate resistance, followed by the 1.3750 zone. A slide back under 1.3635 should expose 1.3600 and the recent low.
The recent decline in GBP/USD, according to analysts at Rabobank, may have then been accelerated by a deterioration in the technical picture. “Last Friday cable broke down from an 8 day rising channel formation. At the start of the week, it broke below the 200-day SMA. Both of these were bearish signals.” They point out sentiment has also been undermined by dovish commentaries at the start of the week from two Bank of England (BoE) officials.
At Rabobank, they consider that if the USD strength is contained, “this should allow GBP/USD to crawl back to the 1.39 region. This, however, would likely require a slightly less cautious outlook on policy from the BoE.”
USD/CAD rebounds in tandem with US dollar, nears 1.2750
FXStreet’s Analyst, Anil Panchal, notes: “A clear break of 1.2730 will enable the USD/CAD bulls to refresh the monthly high beyond 1.2800. Alternatively, a downside break of the 21-SMA level of 1.2675 will be probed by the stated support line near 1.2655 and the early-month top surrounding 1.2590.”
Looking ahead, the pair will remain at the mercy of the US dollar dynamics and oil-price action while the Senate Democrats' vote on the infrastructure bill will also remain in focus.
Meanwhile, falling WTI prices drag the resource-linked Loonie lower, supporting the bounce in the major. The US oil drops back below $67 amid a reduced appetite for risk assets and an unexpected build in the US crude supplies, as shown by the American Petroleum Institute (API) late Tuesday.
The safe-haven demand for the greenback has returned amid souring risk sentiment, as persisting concerns over the Delta covid variant continue to outweigh any optimism over the US stimulus. Ongoing US-China tensions also add to the cautious market mood, collaborating with the dollar’s renewed uptick.
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