GBP/USD: Optimism over the rollout of COVID-19 vaccines to trigger a bounce

GBP/USD is below 1.36. While bears push sterling to oversold conditions, Britain's rapid vaccination campaign and optimism about the Biden era may prompt a bounce, Yohay Elam, an Analyst at FXStreet, reports.

Key quotes

“The new Commander-in-Chief is set to push through his $1.9 trillion stimulus program and a plethora of Executive Orders that would also promote growth. Fears of violence by pro-Trump supporters may be exaggerated, as seen by low participation in protests over the weekend.” 

“Jerome Powell, Chairman of the Federal Reserve, put an end to speculation about an early tapering of bond buys – and the Fed may even go further with expanding its program. That would also weigh on the greenback.”

“In the UK, the vaccination campaign is getting another shot in the arm, with those over 70 being asked to get their jabs. Over 6% of Brits have received at least one dose, the highest in the Western world. Another reason for optimism is the gradual descent in COVID-19 cases, which is showing that the lockdown is beating the effect of the new, contagious variants.”

“GBP/USD has dropped below the 50 and 100 Simple Moving Averages on the 4-hour chart, and also suffers from downside momentum. However, it is still holding above the 200 SMA – which is just around 1.35 – and the Relative Strength Index is touching 30. Oversold conditions indicate a bounce is coming.” 

“Support below 1.35 awaits at 1.3455, the 2020 trough, followed by 1.33, a stepping stone on the way up in late December. Some resistance is at 1.3545, which was a cushion early in the year. It is followed by 1.3610, a support line from last week.”