Daily Market Recap - GBPUSD Weekly Outlook

The GBPUSD ended the week on a softer note after initially recording 4 consecutive bullish candlesticks on the daily chart, pouncing forward from the 1.38 support channel. The pair traded at 1.39108 on market close, down 0.58 percent for the day.

Friday‘s blowout in the US bond market tipped the scale back in favor of the greenback after both the 30 year and 10-year Treasury bills saw their yields continue to rise on the back of Joe Biden’s new 1.9 trillion dollar stimulus plan. Yields on the 10-year bill even reached a high of 1.6405% in intraday trading, levels last seen in February 2020,

The British Pound had been the best performing currency so far in 2021 but has since lost its top spot to the Canadian Dollar. That said, demand for the American buck is at risk of dropping once again depending on the reaction (if any) of the US Federal Reserve next week.

“A rise in yields invariably leads to a strengthening of the greenback,” summarized Ricardo Evangelista, an analyst at ActivTrades. “Before drawing any conclusions for the currency market, we have to wait and see what Fed boss Jerome Powell will say next week,” warned Derek Halpenny, an analyst at MUFG.

The rise in bond yields in the United States is due to fears of a return of inflation, which could push the Fed to tighten its monetary policy, while it promises, for now, to keep rates very low to boost an economy plagued by the Covid-19 pandemic.

So now the big question for next week is whether the Fed will keep a very accommodative approach, potentially weighing on the dollar's price, or will it change its tone in light of the recent upbeat economic data releases.

Anything short of a firm statement against a rate hike and holding the current accommodative policy stable will likely lead to a continuation in the rise in the US Dollar to the detriment of the British Pound.

(Chart Source: Tradingview 14.03.2021)

From a technical perspective, traders may look for a downwards play towards the 1.385 immediate support channel in the short run as markets consensus builds on the outcome of the Fed meeting on Wednesday. A rebound at that point will put into play a consolidation move along with the 1.39 level, with the upper resistance set at the psychologically significant 1.40 mark.

Support & Resistance Levels:

R3 1.42456

R2 1.41371

R1 1.40000

S1 1.38523

S2 1.37595

S3 1.36273

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.