- Summary:
- The GBPUSD price dropped sharply today as the number of Covid-19 cases continue to rise. More traders are bearish on the pound while USD is stronger
The GBP to USD (GBPUSD) price is under intense pressure today as traders react to the grim situation in the UK and Europe. It is trading at 1.3026, which is substantially lower than last week’s high of 1.3177.
The number of Covid-19 cases in the UK has been rising. The country has confirmed more than 874k cases since the pandemic started. Yesterday, the country confirmed more than 19,000 new cases. In the past week alone, it has confirmed close to 100,000 new cases. Worse, health experts believe that the situation will continue worsening as the cold season intensifies.
At the same time, the UK government has limited ability to provide more stimulus to the economy because of the ballooning public debt. Just last week, data from the government showed that debt rose by more than £35 billion in September. This data came a few days after Moody’s downgraded the country’s debt.
Recent data from the UK have been relatively weak. For example, the unemployment rate has continued to rise while inflation has remained relatively low.
The GBP to USD price is also under pressure because of the overall strength of the US dollar. The dollar index, which measures the strength of the greenback, has risen by more than 0.20%. This is because the likelihood of a stimulus package in the United States has diminished as the two parties trade blame.
Finally, the GBPUSD price is falling as more hedge funds get bearish about the sterling. On Friday, data from the CFTC showed that the speculative net positions dropped to 2,000. These positions have been in the negative zone for the past four consecutive weeks.
GBP to USD technical outlook
The hourly chart below shows that the GBPUSD price has fallen in the past six consecutive hours. At the current price of 1.3026, the price is at the lowest level since Wednesday last week. The price is also along the lower line of the Donchian channel. The price has also dropped below the second support level of the Andrews Pitchfork.
Therefore, I expect the downward pressure to continue today as bears aim for the next psychological support level at 1.3000. A break below this support will see it drop to 1.2990. On the flip side, a move above the Friday’s high of 1.3065 will invalidate this trend.
GBPUSD technical chart
