GBP/USD Daily Forecast – 1.2000 Support Tested for First Time in Six MonthsThe British pound continued lower in early trading on Wednesday to test support from the psychological 1.2000 handle which is the same level that triggered a notable rally when it was last tested in September.
Fears over the Coronavirus continue to dominate the markets with investors taking their cash out of the equity markets and buying up US dollars. The pound to dollar exchange has been weighed by a strong dollar and trades at levels not seen in six months.
Equities saw a brief reprieve yesterday when the US announced intentions of implementing fiscal easing measures that could be as large as $1 trillion. The plan still needs to go through Congress but if passed, it could put cash directly into the hands of US citizens either by direct payment or through tax cuts.
The recovery in equities, however, was brief with renewed pressure in early trading today that has led to a nearly 5% decline in the FTSE 100 while US futures have reached their limit down.
The US Dollar has dominated the major currencies, and GBP/USD is down about 9% from the high posted last week. The US dollar index (DXY) was last seen battling the same resistance that held it lower in February. A break higher from here would have the index trading at highs not seen in nearly three years.
GBP/USD is testing major support at 1.2014 that served to hold the pair higher in the third quarter of 2019. The level is considered to be significant and the pair could see a bounce from here if value buyers decide to step in.
In the event of a recovery, upside resistance for the pair is found at 1.2200.
GBP/USD is currently in oversold territory and a bounce appears probable, although there have not been any technical signs of a turn as of yet.
There are likely some stops below the September low, roughly around 1.1958. A decline to trigger stops below this price point cannot be ruled out.
The US Dollar index(DXY) is facing resistance at 99.61 with a further hurdle at the 100 level. Similar to GBP/USD, the index is overbought and there is some potential for a pullback.
- GBP/USD has declined in seven out of the past eight sessions and is testing support from the psychological 1.2000 handle.
- The US dollar faces the same resistance level that triggered a turn lower in February, with further resistance from the psychological 100.00 level.