GBP/USD Daily Forecast – Virus Worries Boost U.S. Dollar

GBP/USD Video 10.07.20.

British Pound Loses Ground As Demand For Riskier Assets Decreases

GBP/USD declined below 1.2600 as the U.S. dollar strengthened against a broad basket of currencies amid fears that the coronavirus pandemic was getting out of control.

On Thursday, the U.S. has once again reported more than 60,000 new cases of the disease, and traders started to seriously evaluate chances of new lockdowns.

The U.S. released better-that-expected employment reports but they were not able to provide support to riskier assets. Initial Jobless Claims declined to 1.31 million while Continuing Jobless Claims fell to 18.1 million.

In addition to virus fears, demand for safe haven assets is supported by another increase in U.S. – China tensions. The U.S. sanctioned several high-ranked China officials over alleged human rights abuses against Uighur minority.

The markets are worried that the continued deterioration of U.S. – China relations comes at the worst possible time when the world economy tries to rebound while the global number of new virus cases continues to surge.

With no big economic reports scheduled to be released today, GBP/USD dynamics will mostly depend on market sentiment. If traders remain focused on the virus, GBP/USD will stay under pressure.

Technical Analysis

gbp usd july 10 2020

GBP/USD has once again failed to settle above the major resistance at the high end of the current trading range at 1.2650. Since April, GBP/USD made five attempts to get above this level but only one such attempt was successful.

However, even this attempt did not lead to a new upside trend since GBP/USD quickly lost momentum and returned to the previous range between the support at 1.2250 and the resistance at 1.2650.

At this point, it looks like GBP/USD will need significant upside catalysts to settle above 1.2650. If this happens, it will head towards the next resistance level at 1.2750.

On the support side, the nearest support area is located between the 20 EMA at 1.2500 and the previous resistance level at 1.2530. In addition, the 50 EMA is located at 1.2470 so GBP/USD is set to receive strong support near 1.2500.

A move below this level will signal a return to the local downside trend. From a big picture point of view, GBP/USD has once again proved that it continues to trade in a wide 1.2250 – 1.2650 range.

For a look at all of today’s economic events, check out our economic calendar.