GBP/USD seems to be under the cosh and could further decline

GBP/USD has dipped under the 1.38 level amid ongoing dollar strength and it has also dipped below critical support at 1.3785. As FXStreet’s Analyst Yohay Elam notes, weak UK data and uncertainty about the Delta variant are also weighing on sterling.

A new month, a fresh blow to sterling

“Markit's UK Manufacturing Purchasing Managers' Index for June has been downgraded to 64.9 points from the original read of 64.2, adding to already existing pressure on the pound.”

“The greater worry is the ongoing spread of the Delta variant of coronavirus, which may still derail the already delayed reopening due on July 19 – and could have a further negative impact later in the year. Britain's vaccination efforts continue at full speed, but the tide has yet to turn in the number of infections.” 

“In the US, Thursday's focus is on the ISM Manufacturing PMI. Economists expect another month of quick growth in the industrial sector. Only a potential drop in the Prices Paid component could dent the dollar's dominance.” 

“The greenback has been able to withstand end-of-quarter flows without any downside correction on Wednesday. That implies another day of strength on Thursday.” 

“Below 1.3785, the next lines to watch are 1.3750, 1.3720 and 1.3670. The last one was a stubborn cushion back in April.” 

“Some resistance awaits at 1.3830, a support line from April, followed by 1.3870, the weekly high.”