GBP/USD Breakout Eyed as Danger Rally Prevails

GBP/USD PRICE OUTLOOK: US DOLLAR REFLATION TRADE FUELING POUND STERLING STRENGTH

The US Greenback swooned on Tuesday and now trades in damaging territory month-to-date following sharp declines over the past three consecutive classes. US Greenback promoting stress was broad-based, although weak spot relative to the Pound and Yen stood out particularly. GBP/USD value motion spiked larger by about 75-pips whereas USD/JPY sank 65-pips.

DXY – US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (09 OCT 2020 TO 09 FEB 2021)

Chart by @RichDvorakFX created utilizing TradingView

On steadiness, the DXY Index fell over -0.5% and now hovers at a crucial juncture underpinned by its 50-day easy shifting common. Failing to carry this key technical help degree might undermine the US Greenback rebound additional and convey the underside Bollinger Band into focus – notably in consideration of the newest relative power index breakdown. This wave of US Greenback weak spot was largely anticipated because it coincided with the falling VIX, which echoes prevailing threat tendencies just like the reflation commerce theme.

USD PRICE OUTLOOK – US DOLLAR IMPLIED VOLATILITY TRADING RANGES (OVERNIGHT)

GBP/USD value motion now seems prefer it might be within the early phases of a breakout larger with technical resistance across the 1.3750-mark within the rearview mirror. That mentioned, it seems there is perhaps some open runway for Pound-Greenback bulls to push towards the 1.4000-handle. GBP/USD is predicted to be one of the vital energetic main forex pairs on Wednesday judging by its implied transfer of 54-pips. US Greenback volatility has potential to speed up in response to commentary anticipated from Federal Reserve Chair Jerome Powell throughout his speech scheduled for Wednesday, 10 February at 19:00 GMT.

— Written by Wealthy Dvorak, Analyst for DailyFX.com

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