GBP/USD eyes 200-DMA at 1.3700 as covid risks loom over UK’s 'Freedom Day’
- GBP/USD looks vulnerable as the UK is set for the ‘Freedom Day’.
- Symmetrical triangle breakdown on the 1D chart calls for a test of 200-DMA.
- The UK covid cases soar the most in the world, risk-aversion lifts the USD.
GBP/USD is wallowing in weekly lows around 1.3750, as the sellers remain in control amid a tepid market mood heading into the European trading this Monday.
Investors remain worried about the recent surge in coronavirus cases globally, in light of the highly contagious Delta covid strain, which has prompted the withdrawal of inflows from the riskier assets while benefiting the safe-haven US dollar.
Meanwhile, the resurgence of the covid infections in the UK, as the nation gears up for a big reopening today – the ‘Freedom Day’, weighs negatively on the pound. Amidst a potential removal of most social curbs, the Kingdom added over 54,000 new cases Saturday and over 47,600 on Sunday.
The rising covid cases coupled with Prime Minister Boris Johnson’s row over a row over self-isolation alongside the Finance Minister Rishi Sunak keeps the GBP bulls at bay. The leaders held meetings with Health Secretary Sajid Javid, who Saturday announced he had tested positive for COVID-19.
All eyes remain on the fresh covid-related developments on the ‘Freedom Day’ while the cable continues to remain on the back foot amid a lack of first-tier macro news from both sides of the Atlantic.
GBP/USD technical outlook
GBP/USD confirmed a downside breakout from a symmetrical triangle on the daily chart last Friday.
The cable extends the previous losses on Monday, heading for a test of the upward-sloping 200-Daily Moving Average (DMA) at 1.3700.
Immediate support is seen at the July 8 low of 1.3742, which now seems to be under attack.
The 14-day Relative Strength Index (RSI) is looking southward below the midline, currently at 38.60, allowing room for more declines.
GBP/USD daily chart
Alternatively, for a meaningful recovery, the bulls need a daily closing above the triangle support now resistance at 1.3789.
The next upside target for the GBP bulls is envisioned at the mildly bearish 21-DMA at 1.3849.
All in all, GBP/USD’s path of least resistance appears to the downside.
GBP/USD additional levels to watch