The Pound-to-Dollar exchange rate is fluctuating in a small band below 1.3700 on Monday morning, as speculators await the next trigger.
As investors in the United States take advantage of a three-day weekend, the US Dollar Index is strengthening from Friday’s comeback gains over 95.00.
An Overview Of The Technical Aspects
GBP/USD CHART Source: Tradingview.com
The Pound-to-Dollar exchange rate is trading around the bottom limit of the rising regression band, which is now aligned at 1.3680 and has been in place since December.
Supposedly if the level proves to be a barrier, the pair may extend its pullback toward 1.3660 (the stationary level), before 1.3620 (the 50-period simple moving average on the four-hour chart) and 1.3600 (the 50-period SMA on the four-hour chart) (psychological level).
On the other extreme, 1.3700 (20-period simple moving average, psychological level) is the first technical barrier before 1.3720 (mid-level of the rising channel) and 1.3750 (lower line of the ascending channel) (multi-month peak set last week).
An Overview Of The Fundamentals
At the beginning of the new week, the Pound/Dollar has begun to trade sideways as investors await the arrival of the next trigger.
Aside from Friday’s fall, the pair has completed the fourth consecutive week in the green, and it is still up more than 100 pips so far in January.
In the medium term, the Dollar’s market value is anticipated to continue to have an influence on the GBP/USD exchange rate.
As a result of the Martin Luther King Jr. Day holiday, the stock and bond exchanges will be closed on Monday, indicating that the pair will continue sideways.
In response to warnings from both New York Fed President John Williams and San Francisco Fed President Mary Daly about the impact of Omicron on inflation, the premium on the benchmark 10-year US Treasury bond increased by more than 4% on Friday.
Even though the US Dollar Index recovered 0.3% on Friday, snapping a three-day losing run, the index appears to be struggling to keep up its rebound pace in the coming weeks.
Meanwhile, investors are keeping a careful eye on the political situation in the United Kingdom.
Multiple news sites have reported that British Prime Minister Boris Johnson has lost popularity due to the “Partygate” incident and that his Conservative Party has slipped behind Sir Keir Starmer’s Labour Party in the most recent election poll.
Although it is still too early to predict whether or not a snap election will be called in the United Kingdom, mounting political tensions might make it more difficult for the Pound to attract foreign investors.