GBP/USD Price Could Break 1.38 As Brexit And Covid Weigh On Pound

  • GBP/USD continues to decline as the Greenback bulls keep control.
  • COVID concerns are again heading up, putting pressure on the Pound.
  • Brexit woes are a constant bee in the bonnet for the Pound.

During Wednesday’s Asian session, the GBP/USD price dropped to around 1.3825. As a result of the strengthening of the US dollar and concerns over Covid and Brexit, Cable hit a two-week low a day earlier.

On Tuesday, the US Dollar Index (DXY) posted a three-day streak, rising to its highest level since July due to a combination of cautious optimism among Fed officials and President Biden’s acceptance of infrastructure spending. Moreover, gloomy gold prices and spreads on the Delta-Covid option played a role in supporting the yield on US 10-year Treasuries and weighing on the dollar. These factors also impacted the price of the British Pound from the dollar.

According to The Guardian, the UK government has recommended expanding emergency powers to trucks entering France to exercise Brexit rights, “indicating that the government is anticipating yet another mutual setback.”. The UK’s decision to grant Gower Salt Marsh Lamb protected status also highlights concerns about Brexit.

Sadly, COVID-19 has hit its highest death toll in five months in the UK, casting doubt on the government’s efforts to contain the pandemic, with 75% of the nation being infected twice. As a response to criticism, Boris Johnson’s regime ordered more vaccinations from Pfizer.

However, even after the benchmark Wall Street Index hit an all-time high, S&P 500 futures remain hesitant. In addition, the yield on 10-year US Treasuries rose 1.7 basis points (bp), again hitting a monthly high.

In the absence of important data/events from the UK, the GBP/USD pair will pay close attention to qualitative factors as well as the US CPI for July to find direction.

GBP/USD Price Technical Analysis: Death Cross To Exacerbate Selling

GBP/USD 4-hour price chart

GBP/USD 4-hour price chart

The GBP/USD pair remains offered well below the key SMAs on the 4-hour chart. However, the same chart shows a death cross of 200 and 50 SMAs, indicating a further drop in the pair. The next key support lies at 1.3800 ahead of 1.3770. On the upside, a retracement towards 20-period SMA near 1.3850 cannot be ruled out. But the overall trend remains bearish unless the price breaks 1.3910 resistance.

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