1 February GBPUSD Elliott wave analysis

A choppy GBPUSD is retrained within the 1.375 and 1.36 as the dollar climbs higher. The following 1 February GBPUSD Elliott wave analysis shares some technical insights.

February 01, 2021 / AtoZ Markets – After a significant surge in the Asian session, GBPUSD is dropping back into the 1.37 psychological level. The cable has not been able to sustain the resurgence above 1.37 as a result of mixed risk sentiments and the instabilities around UK-EU Covid vaccines breeding fears of a rancor between the two just after Brexit.

UK Covid and Vaccines development

UK has ramped up vaccine administration which is very impressive. Over 11% of the population has been vaccinated which has raised hopes of a fast UK economic recovery. However, the EU’s fate in this regard has not been as great. The EU has asked Astra Zeneca to cut down vaccine supply to the UK . This is to enable it to bridge the gap between the virus spread rate and vaccination rate. Market participants might be worried about a breakdown in the relationship between the UK and the EU. This is not good for the Pound.

Also, new mutations in the UK with a high mortality rate are raising concerns. Both are not good for the Pound Sterling. However, it seems everything will be contained soon (hopefully) with the seriousness of the UK policymakers. Despite this, reports from the virus angle will still be one of the things traders have to worry about.

Band of England monetary policy meeting

The Bank of England will reveal its new rate policy going forward. The market expects the rates unchanged at 0.1%. However, there is a possibility that the bank will support a negative rate, going forward, which will drag the Sterling further downside. Aside from the rate statement, market participants will want to decipher hawkish or dovish tone from the BoE Governor Bailey’s statements during the press conference. If the recent economic data has surpassed the bank’s expectation (hawkish) and he maintains some optimism concerning Covid, the bank might not encourage a sub-zero rate and the Pound will surge afterward.

1 February GBPUSD Elliott wave analysis

1 February GBPUSD Elliott wave analysis

Chart from TradingView

GBPUSD has been gliding higher since the turn of the year despite a bullish dollar. However, the 1 February GBPUSD Elliott wave analysis chart above shows an emerging bearish wedge/ending diagonal pattern. With the bullish restriction at 1.37, the near-term forecast suggests a decline to 1.34-1.35 at least. However, there is a space at the top for the pair.

A hawkish BoE could lead to a re-test of 1.37 and an eventual breach toward 1.385-1.39 (roof of the wedge pattern). Traders should also focus on the US PMIs, job data and the general dollar index performance which are also very important.

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