- GBP / USD captures some lower levels on Monday and spikes to multi-day highs in the past hour.
- The rally is due to a driving force coming from the EUR / GBP and GBP / JPY crosses.
- The prevailing buying of the USD should limit the rise of the pair.
A sudden spike in demand for the British pound has pushed the pair GBP / USD to new four-day highs, around the 1.3835 region, during the European session on Monday, although it has rapidly retreated a few pips since then.
After an initial drop to the 1.3755 region, the pair has captured some aggressive buying and turned positive for the third day in a row on Monday. Strong intraday momentum has helped GBP / USD take advantage of last week’s bounce move from multi-week lows.
However, the rebound has lacked an obvious fundamental catalyst and it could be attributed solely to a certain force propelled by the crosses. In fact, the EUR / GBP cross has fallen to the lowest level since February 2020 and the GBP / JPY cross has recovered more than 100 pips from intraday lows.
Apart of this, the last leg of the strong rally in the past hour has been led by some technical buying following a sustained move above the round 1.3800 level. That said, the underlying bullish sentiment around the USD has limited the further rise in GBP / USD.
Investors have remained optimistic about the prospects for a relatively faster US economic recovery from the pandemic. This, coupled with weaker trade sentiment around US stock index futures, has benefited the safe haven US dollar and should limit any further gains for the GBP / USD pair.
Meanwhile, the current dispute over vaccination between the EU and the UK and the recent escalation of diplomatic tensions between the UK and China could also prevent the bulls from opening aggressive positions on the British pound. This, in turn, warrants some caution before positioning for any further bullish movement.
There is no major economic data release on Monday, neither from the UK nor the US So any subsequent positive movement could still be seen as a selling opportunity and risks fading quickly amid buying interest. predominant around the USD.
GBP / USD technical levels
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