- GBP / USD faced rejection near the 1.4200 level and is moving lower for the second day in a row.
- A combination of factors should help limit the decline and warrant caution among bears.
The pair GBP/USD is extending its steady intraday decline during the European session on Monday, falling to new daily lows around the region of 1.4170-65 in the last hour.
The pair has had Difficulty capitalizing on the good rebound on Friday of around 50 pips from the 1.4135 region and has faced rejection near the 1.4200 level on the first day of a new trading week. GBP / USD has now moved into negative territory for the second day in a row, although a combination of factors should help limit any significant drops, At least for the moment.
Despite stronger US inflation data, investors appear to be convinced that the Fed will maintain its ultra-flexible monetary policy for a longer period. Several FOMC officials have played down inflation concerns, reiterating that any increase in prices would turn out to be temporary. This could act as a headwind for the US dollar and offer some support to the GBP / USD pair.
On the other hand, sterling could continue to benefit from optimistic outlook for UK economic recovery after pandemic. Furthermore, the optimistic comments from Bank of England legislator Gertjan Vlieghe, saying that the central bank could raise rates in the next year, should further prop up the British pound, which warrants some caution for the pair’s bears.
Furthermore, relatively tight liquidity conditions amid the UK and US holiday could prevent investors from opening aggressive new positions. Therefore, it will be prudent to wait for some solid continuation buying before confirming that the GBP / USD has peaked in the near term and has positioned itself for any significant corrective declines.
GBP / USD technical levels
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