GBPUSD Sitting On Key Support
The breakdown below the rising channel from 2020 lows has seen GBPUSD sitting on a ledge of support at the 1.3676 level. While the trend is still bullish for now, the breakdown below the rising channel raises reversal risks.
There was strong bearish divergence heading into the last high and with the retail community holding a 62% long position in cable, there is room for a reversal to develop further on a break of 1.3676 with 1.3461 the next target area for bears and 1.32 thereafter.
In terms of the fundamental backdrop, GBP is at an interesting point. While there is a great deal of optimism over the continued easing of lockdown (further easing activated today) there is also a growing level of concern over the slowing pace of vaccinations.
Given the third wave underway in Europe, there are fears of a similar development here which could see lockdown easing postponed or reversed if infection rates start to rise again.
Key Data to Watch
On the data front, the key releases for GBP this week will be the industrial and manufacturing production figures due tomorrow. While both readings are expected to have improved over the last month, any unexpected weakness here could fuel a move lower in GBP.
The market will also be watching NIESR GDP estimate tomorrow. US CPI and Retail Sales data due on Tuesday and Thursday respectively will also be on watch. Any strength in these readings should see USD advancing against the Pound.
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