The Pound is on the retreat beneath 1.3600, unable to find a clear path in the face of a conservative market attitude, a weakening COVID, and Brexit fears.

With interest rates stabilizing at higher levels, the US Dollar has made a strong recovery following Friday’s sell-off. The EU is “disappointed” as UK Foreign Secretary Boris Truss indicates a willingness to use Article 16.

Assessment Of The Technical Aspects

GBP/USD CHART Source: Tradingview.com

Now that the pair has started a bullish pullback, it has been seen swinging in a band close to the highest level recorded since Nov 9, underneath the 1.3600 mark.

When looking at the four-hour chart, the Relative Strength Index (RSI) is closing in on 70, reinforcing the idea that the pair is likely to undergo a technical correction before launching into a new upward trend.

The psychological level of 1.3600 (also known as the stationary level and the middle-line of the upwards regression stream) aligns with key opposition. Buyers may show an interest in the duo if that tier is turned into support.

The next objectives might be 1.3635 (stationary level) and 1.3680 (stationary level), which are also possible.

Holds are situated at 1.3580 (the lower-line of the upward regression band), 1.3560 (20-period simple moving average), and 1.3530 on the downside (50-period SMA).

An Overview Of The Fundamentals

After missing the break over 1.3600 on Friday, the Pound/Dollar pair has begun to meander sideways at the start of this week.

Growing US Treasury bond rates and falling market valuations of the Greenback imply that the Pound-Dollar pair may stage a pullback shortly.

The Nonfarm Payrolls (NFP) data for December indicated on Friday that nonfarm payrolls increased by 199,000, falling just short of the market projection of 400,000 new jobs.

Despite further dumping pressure on the Dollar due to this poor report, the benchmark 10-year US Treasury note yield rose to its highest level since January 2020, about 1.8%, near the end of the week.

With wage inflation exceeding expectations and the unemployment rate remaining low, market players expect the Federal Reserve to maintain its tightening path.

The CME Group’s FedWatch Tool predicts that the Federal Reserve will raise interest rates by 25bps in March, and speculators are assessing the likelihood of quantitative tightening in 2022.

 The US Dollar Index, which managed to lose more than 0.5% on Friday, is posting moderate daily gains that are just below 96.00, preventing the Pound-to-Dollar from regaining its foothold in the market.

There will be no high-quality data updates for the rest of the day, and the Greenback should be able to maintain its strength against the Pound as long as the yield on 10-year US Treasury notes remains below 1.75%.