The pound against the US dollar has always benefited from market optimism, and market optimism has put pressure on the US dollar. FXStreet analyst Yohay Elam reported that strong employment data in the UK and reduced concerns about the virus strain are boosting the pound-the pound is expected to ignore overbought conditions and reach a three-year high against the dollar.
The pound/dollar will rise slightly against the backdrop of the Fed’s still dovish and rising inflation in the United States-Tokyo-Mitsubishi UFJ Bank.
The pound has good reasons to appreciate, and the dollar has reasons to fall.
The unemployment rate in the UK fell to 4.8% in March, beating expectations, indicating that the UK economy was performing strongly when the reopening was just starting. The most recent change in the number of claims in April also exceeded expectations, with a decrease of 15,100.
On Monday, several restrictions were relaxed due to concerns that the mutation, first discovered in India, is spreading rapidly. However, new research shows that existing vaccines effectively deal with this new variant. The UK is very advanced in population immunization, and 35-year-olds are now eligible to be vaccinated.
As the Fed insists that the rise in inflation is temporary, the U.S. dollar has been affected. Raphael Bostic, President of the Federal Reserve Bank of Atlanta, will speak later today. If he does not deviate from the current position of the central bank, it will be difficult for the dollar to recover.
The relative strength index (RSI) of the 4-hour chart, the pound has entered the overbought zone. It has exceeded level 70.
Near-term resistance is at 1.4215, which is the highest level since February. Going further, the 2021 high of 1.4240 will face challenges. Breaking through this level, the upward target is 1.4375, the 2018 high.
Initial support is at 1.4160, which is the May high. It is followed by 1.4105, 1.4075 and 1.4050.