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GBP/USD attempts a rebound amid firmer USD

The GBP/USD remains capped below 1.3800 level. However, attempts to rebound from support near 1.3750 amid a persistent optimism about the US dollar.

Markets remain nervous after massive fund liquidation, benefiting safe-haven US dollar.

On the GBP side, the bulls ignore the easing of covid restrictions in the UK and vaccination rates higher than the European Union. Falling oil prices are likely to weigh on the UK’s FTSE 100 index, which weighs heavily on commodities. In turn, it could put additional pressure on the pound.

Markets are now looking forward to broader market sentiment and USD price action for further signals.

 

US Dollar Index approaching 93.00 level

The US Dollar DXY Index, which measures the dollar’s strength against a basket of major currencies, is trading higher.

The DXY index leaves behind the slight drop of Friday and resumes its rise with the initial target near the 93.00 region, the area it previously approached in November 2020.

The current rally in the dollar comes despite key US 10-year benchmark yields losing some bullish momentum and trading at the lower limit of the daily range in the zone below 1.65%.

Meanwhile, the dollar’s strength continues to be supported by the US economy’s expected outperformance versus the other G-10 countries, at least in the first half of the year. This view is reinforced by the US vaccination campaign’s solid pace and additional fiscal spending under the recently approved new stimulus package worth $1.9 trillion.

Regarding US data, the Dallas Fed Manufacturing Index will be released today, followed by FOMC Governor C. Waller’s speech on Federal Reserve Independence.

 

What can we expect around the USD?

The US dollar’s bullish momentum looks firm and solid, with the DXY index trading near the 93.00 level. Analysts think that the recent breakout of the 200-day SMA seems to reinforce the dollar’s constructive view, at least in the short term.

The recently approved fiscal stimulus package adds to the current superior performance of the US economy. Also, investors expect higher inflation in the coming months. All transforms into additional strength for the dollar. However, the Fed’s mega-accommodative stance and hopes for a solid global economic recovery remain a source of support for risk appetite. It potentially limits the upward momentum of the dollar.

The DXY index gained 0.02%so far on the day, trading at 92.77. A breakout of 92.91 would expose 93.00 and 94.30. On the other hand, the next support is at 91.30, followed by 91.11 and then 91.05.

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