GBP/USD Forecast: Cable torn between British optimism and safe-haven dollar demand, levels to watch

• GBP/USD has been retreating from the highs as the dollar has regained some ground. 
• Sterling may receive support from falling covid cases and steps to ease the pingdemic. 
• The safe-haven dollar has room to rise if data disappoints and virus worries increase.
• Friday's four-hour chart is painting a mixed picture.

Exactly two years have passed since Boris Johnson won the Conservative Party leadership contest and took office as Prime Minister – and nobody back then would have thought that "pingdemic" would be the most used words now. Addressing this burning issue is supporting the pound. 

The PM and his government have been easing self-isolation guidance as hundreds of thousands of Brits were called to quarantine after being exposed to people testing positive for COVID-19. Staff shortages in food supply chains have already had their effect on the population and threatened to derail the nascent reopening of the economy. That is not how Johnson imagined the week including "Freedom Day."

Apart from easing the "pingdemic," the pandemic is also showing signs of receding. The UK still reported a high number of daily cases – over 40,000 – but these numbers are beginning to retreat. Britain's vaccination campaign has nearly reached 70% of the population with one vaccine shot and is stemming the spread of the highly transmissible Delta variant. 

Another factor helping sterling is the UK shopper – Retail Sales rose by 0.5% last month, better than expected. On the other hand, the intensifying EU-UK row over the Northern Irish protocol is weighing on the pound. Brexit's lingering issues – even if related to specific sectors in a small corner of the economy – may have bigger implications. 

While rays of sunshine come from Britain's covid cases, the situation continues deteriorating in the US. The rapid increase in America's infections, hospitalizations and deaths prompted the CDC to issue a stark warning. Officials seem hesitant to impose restrictions and calls to get vaccinated have been facing political opposition.

The rise in US stock markets and the risk-on mood resulted in falls for the safe-haven dollar in recent days – but investors could have a rethink on Friday. Markit's preliminary Purchasing Managers' Indexes for July will likely point to a slowdown due to covid, rising inflation and supply-chain issues. 

US Markit PMIs Preview: Pre-weekend dollar boost? Downbeat figures could exacerbate risk-off mood

Overall, a potential rush to the greenback could halt sterling's recovery.

GBP/USD Technical Analysis

Pound/dollar is benefiting from upside momentum on the four-hour chart but has failed to hold onto the 50 Simple Moving Average. The Relative Strength Index is balanced, adding to the notion of a mixed picture. 

Support awaits at the daily low of 1.3723, followed by 1.3670 – the former double-bottom – and then by 1.3640 and 1.3570. 

Resistance is at 1.3780, which is where the 100 SMA converges with the daily high, and then by 1.3860, 1.3905 and 1.3940.