GBP/USD: Optimism about falling UK covid cases to push cable toward 1.40

GBP/USD has recaptured the 1.39 level amid an improving market mood. In the view of FXStreet’s Analyst Yohay Elam, there is room for cable to climb higher toward 1.40.

See – GBP/USD: Positive COVID-19 developments reinforce bullish sterling outlook – MUFG

UK cases continue falling from their highs

“COVID-19 continues its descent in Britain. With over 70% of the population having received at least one vaccine shot, cases are down to near 20,000 daily from a peak of over 50,000. That implies better growth prospects and a stronger pound.”

“The ISM Manufacturing Purchasing Managers' Index dropped to 59 points in July, worse than expected and pointing to slower – yet still robust – expansion. Moreover, the Prices Paid statistic in the PMI fell off the highs – showing relief in inflationary pressures. That is positive news that could eventually be cheered by investors. Any improvement in sentiment could weigh on the greenback.” 

“What about Brexit? Lingering issues from the UK's exit remain open, but both sides are now in a truce of sorts, refraining from new action over the Northern Irish protocol.” 

“Some resistance awaits at 1.3930, a high point from early in the week. It is followed by 1.3980, which capped cable twice in late July.” 

“Support is at the daily low of 1.3875, followed by 1.3850 and then by 1.3760.”