The British pound has been losing in value against the US dollar for the second day in a row. Despite the greenback's weakness, the pound/dollar pair has dropped by 150 pips since the beginning of the week. The downtrend will hardly change in the near future. This means that bears have taken control over the market. Curiously, the pair reversed without any significant reasons. The previous rise could be explained by obvious fundamental factors. However, the decline seems to be caused by some technical reasons and by the fact that investors began closing their positions after a failure to break the 39th pattern. This week, the US dollar index stopped dropping, although it shows no intention to rise. That is why a decline in the pound/dollar pair is not connected with the US dollar dynamic. The pound sterling is losing in value against all currencies. For example, the pound/dollar pair and the yen/dollar pair are also falling.
On Monday, buyers of the pound/dollar pair tested the 39th pattern, reaching the level of 1.3913. In one day, the price jumped by 100 pips (the lowest level was logged at 1.3813). However, the price failed to consolidate at the 39th level and began falling later that day. Today, it reached a new weekly low at 1.3727.
Such price fluctuations took place amid an almost empty macroeconomic calendar. During the European session, only data on the services PMI was unveiled. It was the final report for March. The figures were slightly revised downwards (56.3 points instead of 56.8 points). Thus, such a report could hardly lead to a drop in the pair. Moreover, the pound sterling began falling earlier.
In my opinion, the bearish sentiment will hardly last for a long time. Unlike the euro, the British pound may resist the US dollar, taking into account the fundamental data. The fact is that the UK is loosening the lockdown measures. At the end of March, the UK's citizens were allowed to gather in an open area in groups of no more than six people. Moreover, outdoor sports activities are not prohibited any more.
From April 12, all stores in England will open (since the end of winter, only those shops that sell basic necessities have been opened), gyms, spas, zoos and entertainment parks will be reopened. In other words, Britain is moving within the framework of the previously outlined plan. According to this plan, the country will completely lift quarantine restrictions in August.
The UK has reached the largest number of vaccinated people. Thus, 32 million people in the country have already received their first doses, whereas 5 million people (that is about 10% of adults) have received both doses. Long-lasting lockdowns and extremely high paces of the vaccination program have brought fruits. In January, the number of new virus cases totaled 50-60 thousand people a day. At the moment, the indicator is hovering around 3 thousand. Of course, it is too early to talk about the victory, but the overall tendency is extremely positive.
However, macroeconomic reports may negatively affect the British pound. According to the recent data, the number of the unemployment claims advanced by 86 thousand, whereas economists had expected a smaller rise of 9 thousand. At the same time, inflation shows an insignificant increase. On a monthly basis, the UK's consumer price index inched up just by 0.1%. On a yearly basis, the indicator slowed down after a jump in the previous two months. Of course, such weak macroeconomic reports do not support the national currency. Notably, the UK publishes its statistical data with a big delay. For example, now we are analyzing the data for February. Since then, the UK authorities have done a lot to combat the coronavirus pandemic and boost the local economy.
That is why the pound sterling skyrocketed to the 39th pattern despite disappointing data. In my opinion, the upward impulse is still in force. The pound sterling withstood negative macroeconomic reports and dovish comments provided by the representatives of the Bank of England. However, later, it slumped without a significant reason. It is quite possible that the further loosening of restrictive measures and acceleration in vaccination paces may push the pound sterling higher.
The nearest support level for the pound/dollar pair is located at the level of 1.3700. This is the lower limit of the Kumo cloud on the daily chart. Next support level is located at the lower line of Bollinger Bands that coincides with the target of 1.3660. If the downward impulse starts losing its force near the bottom of the 37th pattern, it will be possible to open long positions with the target of 1.3840 (a middle line of Bollinger Bands on the daily chart that coincides with the Kijun-sen line).
