GBP/USD Looks To Test 1.3850 As US Dollar Eases Amid Upbeat Mood
GBP/USD is back on the bids amid risk-on mood, weaker DXY.
The UK’s higher vaccination rates and strong April seasonal pattern underpin.
Focus shifts to the US ISM Services PMI amid a quiet Easter Monday.
GBP/USD is staging a comeback towards 1.3850, as the US dollar stalls its recovery amid the upbeat market mood.
The cable jumps back on the bids in a quiet Asian session on Easter Monday, helped by a minor retreat in the US dollar against its main peers, as a risk-friendly market environment usually dents the greenback’s safe-haven appeal.
The sentiment remains lifted by the expectations of faster US recovery after the economy added nearly a million jobs in March, blowing past the market consensus. Prospects of quicker return to full employment bolstered Fed rate hike odds, in turn, boosting the shorter-duration yields.
On the GBP-side of the equation, higher vaccination rates in the UK and fading Brexit pessimism keep the pound underpinned. Meanwhile, the seasonal factor also remains supportive of the cable. The major has gained on average over 1% in the month of April, looking at it historically from 2000.
Further, the Bank of England’s (BOE) upbeat outlook on the economy, with the latest policy statement citing that 2021 Q2 could see ‘slightly stronger’ consumption growth, collaborates with the bullish undertone in the pair.
Looking ahead, the spot is likely to track the US dollar dynamics and risk tone. Easter Monday-induced low liquidity could also have a significant impact ahead of the US ISM Services PMI report.
“It continues to face strong selling pressure around 1.3845-50 region. That zone is the confluence of the horizontal 21 and 50-daily moving averages (DMA). Buyers need acceptance above the 1.3850 key upside barrier, in order to extend the break higher towards 1.3900. However, with the relative strength index (RSI) having returned to the bearish territory, GBP/USD is envisioned to breach the 1.3800 support should Friday’s low of 1.3813 cave-in.”
