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GBP/USD Continues to Consolidate Near the 1.2500 Level

By:
Jignesh Davda
Published: Jul 7, 2020, 10:19 UTC

GBP/USD has been little changed over the past three days while holding near the 1.2500 price point.

GBP/USD Continues to Consolidate Near the 1.2500 Level

The markets have reversed course from yesterday with equities under pressure while the dollar is recovering. However, GBP/USD has not been impacted much by other markets and continued to hold in a tight range near the 1.2500 handle.

The S&P 500 (SPY) rallied yesterday to highs not seen in nearly four weeks, posting a daily gain of 1.54%. However, the US equity index has pared about half of those ahead of the opening bell today.

In a correlated move, the US dollar index (DXY) has recovered from lows not seen since late June to wipe out a bulk of yesterday’s loss.

The UK has announced an emergency support package worth 1.57 billion pounds to assists theaters and the creative sector. The package is expected to help lower the number of workers being let go as most institutions have been closed since the virus outbreak earlier this year which has weighed on their books.

UK Prime Minister Boris Johnson is receiving some backlash on his earlier comments about the way elderly care homes have managed the Coronavirus pandemic. Johnson attempted to steer blame by saying that “too many care homes didn’t really follow the procedures.”

BBC News reported that nearly 30,000 more people have died in elderly care homes compared to last year and two-thirds of these deaths have been as a result of the virus.

House prices in the UK were reported to fall for a fourth straight month, declining 0.1% in June. The last time the UK property market saw a streak of falling prices this long was in 2010.

Technical Analysis

GBPUSD 4-Hour Chart

GBP/USD has strayed from its typical correlation with equities and has held up well considering the dollar has been recovering in early trading.

The 1.2500 level continues to be a big hurdle for the currency pair, and while below it, the risk of a further consolidation or correction remains.

Support for the session ahead is seen at 1.2450 while sellers have been present on rallies to the 1.2500-1.2520 area.

A sustained break above 1.2520 could see the pair extending gains towards support near 1.2650. On the other hand, a decline below Friday’s low 1.2438 might set the near-term tone for further losses.

Bottom Line

  • GBP/USD has held in a tight range as the 1.2500 handle has proven to be a hurdle.
  • The range may continue considering the light economic calendar this week and as the pair appears to be little impacted by volatility in other markets.

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

About the Author

Jignesh has 8 years of expirience in the markets, he provides his analysis as well as trade suggestions to money managers and often consults banks and veteran traders on his view of the market.

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