GBP / USD retraces after testing yearly highs at 1.3700 area

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  • The pound remains among the strongest currencies within the majors.
  • GBP / USD loses steam after returning to 1.3700.

He GBP / USD continued the rally that started on Monday and reached 1.3701, just shy of the year-high from early January. After this, it corrected downwards before a general strengthening of the dollar, finding support at 1.3650.

In the preview of the publication of US inflation data the pair is trading at 1.3670, slightly bullish for the day. No big hit from US economic figures expected. Later it will be the turn of the Fed’s Beige book on the state of the economy.

In the USA the Focus of attention remains on Washington and politics. Within a week of Joe Biden’s inauguration, Democratic lawmakers will impeach Trump. The proximity to the change of government makes the event less relevant, but it is still relevant for the markets.

Stocks are trading sideways, near recent highs. The dollar for its part recovered strength in the last hours and rebounded, this being one of the factors behind the decline of the GBP / USD.

The other part of the decline from the pair’s highs was the proximity to the 1.3700 / 05 zone. That level is not only the maximum in years reached in January but also a psychological level, which is now a key resistance. The break of it would enable a bullish extension. For the moment, the approaches have been followed by setbacks. Below 1.3650, the next support can be seen at 1.3620.

From a fundamental point of view, the GBP / USD rally had a boost in Tuesday’s comments from the Bank of England Governor on negative interest rates. His words lowered expectations about negative rates and boosted the pound, which on Wednesday, for the second day in a row, is among the best performers.

Technical levels

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