The GBP/USD is currently stuck between a hard place and a rock, but I think it will rise further over time, observes Fawad Razaqzada of Trading Candles.
Although right now it is facing resistance due to fears over the economic impact of the UK's latest national lockdown, the downside looks to be limited.
I think the cable will be provided stronger support because:
- Investors are unwinding their bearish bets over a no-deal Brexit (which has been avoided)
- The dollar is continuing to remain under pressure (which is also why I think gold and silver are heading sharply higher)
- The rollout of vaccines will probably help the UK become one of the first major developed economies to go back normal—hopefully in the not-too-distant future!
Momentum is another factor, which could support the cable’s recovery—especially if it remains above the breakout level of 1.35ish:
Currently, the GBP/USD is trying to form a base after Monday’s sell-off. But if the buyers step in around current the levels as I think they will, and we make a new high for the year, then that could ignite fresh momentum buying to take us towards and possibly above 1.4000 hurdle next.
While there is obviously a risk that rates could break down in the short-term, I am currently not entertaining any bearish trade ideas for the price structure remains bullish given the higher highs and higher lows, etc. If that were to change in the future, then I will, of course, change my mind. However, as things stand, the path of least resistance remains to the upside.
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