Dollar Rally Strengthens, Triggers Selling Pressure on Cable

On Thursday, renewed pressure in the GBP/USD was triggered by strong follow-through dollar buying. The US dollar inched up against the euro as the FOMC Minutes revealed that tapering will most likely begin around the close of the year. This comes after several Fed officials, including erstwhile doves, have made remarks in the last two weeks with a very hawkish tone. At 93.15, the dollar index was marginally higher.

GBP/USD pair sank to near one-month lows, at 1.3656, before recovering a few pips. The pair was last seen trading slightly around 1.3660, down more than 0.45 percent on the day. Following the previous minor recovery, the GBP/USD pair came under further selling pressure, extending its current drop from the key psychological level of 1.4000. Several variables combined to propel the US dollar to its highest level since November 2020, which was viewed as a major factor in dragging the GBP/USD pair lower.

The US Dollar Index (DXY) is at an all-time high. The Federal Reserve is still on the verge of tapering, but global prospects are deteriorating as a result of Delta. While Jackson Hole may disappoint, fresh DXY highs beyond that are still possible as the Q4 taper announcement approaches.

Investors are nonetheless concerned that the coronavirus’s fast-spreading Delta form could derail the global economic recovery. The equity markets were a sea of red, indicating this. Aside from that, predictions that the Federal Reserve will begin tapering its asset purchases later this year prompted investors to seek refuge in the traditional safe-haven currency, the US dollar.

Dollar/Cad Begins Its Upward Trajectory, Aims for the 1.2870 High

USD/CAD continues to rise rapidly after breaking above its 200-day average and, more significantly, its latest high of 1.2817 to signify the conclusion of a closer base. The fact that the market has a much larger multi-month basis should indicate that the uptrend is restarting.

For a retest of 1.2870 resistance, the intraday bias in USD/CAD remains on the upward. Following a firm break, the increase from 1.2005 to 1.3022 Fibonacci level will resume. On the downside, a breach of minor support around 1.2597 will shift intraday bias to the downside, extending the corrective pattern from 1.2805 with a new plunge.

Further, then the earlier level, resistance is indicated at the year’s highs near 1.2870/81, which can reinforce a grounding tale. The ‘defined base target’ continues to point to a move to 1.3022, which is also the 38.2 percent retracement of 2020/2021 fall, where we would expect a stronger cap. Closer support shifts to 1.2687, then 1.2649/43, with yesterday’s low around 1.2599 currently holding ideally to maintain the significant danger higher.