GBP/USD prints fresh highs near 1.4125 after recovering key technical level

• US dollar extends losses during the American session.
• GBP/USD rejected again from under 1.4100, keeps the strong support.

The GBP/USD rebound further during the American session and reached a fresh daily high at 1.4123. It is hovering around 1.4110/15, marginally above Friday’s close.

The key move in cable was the rebound back above 1.4100 after falling to 1.4069, the lowest intraday level since May 14. A daily close clearly under 1.4100 would suggest a deterioration in the technical outlook for the pound.

On Monday, the pair rebounded amid a decline of the US dollar gains most currencies, excluding the yen. The DXY dropped under 90.50 even as US yields moved to the upside and equity prices turned negative.

Between the Fed and the reopening

The week has started with some calm in major pairs with a pullback of the US dollar and sharp moves in yen’s crosses and metals. However, volatility is likely to dominate all markets ahead of the two-day meeting of the Federal Resave that will start on Tuesday. “We expect a hawkish hold stemming from a shift in the Dot Plots, upgraded economic forecasts, and potential tapering talk.  With risks to U.S. yields weighted to the upside, the dollar is likely to benefit from any bond market repricing of the Fed and inflation outlooks”, wrote experts at BBH. 

Regarding the UK, analysts at ING consider the economic reopening and fast vaccination stories are fully priced in. “While the spread in the Indian variant makes it likely that the 21 June restriction easing will be postponed, the impact on the economy should be very limited (with the delay likely being a matter of weeks)”. They see GBP/USD at 1.44 in a one-month period and at 1.46 in six months.

Technical levels