GBP/USD Daily Forecast – Attempt To Settle Above 1.2500

GBP/USD Video 02.06.20.

British Pound Continues Its Rally As Investors Bet On Riskier Currencies

GBP/USD continues its upside move as traders rush to buy riskier currencies despite the increase in U.S. – China tensions and protests in the U.S.

The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has settled below the 98 level and continues its attempts to go lower.

Yesterday, Manufacturing PMI data from both the U.S. and UK confirmed that the economies have found a bottom and started to recover in May.

Traders continued to focus on the upcoming recovery from the coronavirus crisis and completely ignored any negative catalysts that may be in play in the upcoming weeks.

Such environment is very supportive for the British pound which experienced a material rally since mid-May. The U.S. dollar is under pressure against many currencies, and it will likely need material catalysts to change this trend.

At this point, there are no signs of nervousness in the market which is bullish for GBP/USD. There are no major economic reports scheduled to be released today, but investors’ risk appetite will soon get tested by the U.S. ADP Employment Change report which will be published on Wednesday.

Technical Analysis

GBP/USD continues to gain upside momentum after it breached the resistance at 1.2350. GBP/USD easily dealt with the following resistance at 1.2450 and is trying to settle above 1.2500.

If this attempt is successful, GBP/USD will head towards the major resistance level at 1.2650.

Previously, GBP/USD made two attempts to get above 1.2650. Both attempts were similar since GBP/USD did not go through a period of consolidation before the test of the resistance level at 1.2650.

In such scenario, GBP/USD had little chances for a successful test of this level. The previous moves towards 1.2650 were fast that no material levels were formed between 1.2500 and 1.2650.

Thus, GBP/USD may face little resistance on its way to 1.2650 in case the U.S. dollar remains under pressure against a broad basket of currencies.

On the support side, the nearest support level is located at 1.2450, followed by significant support at the 50 EMA at 1.2360. In case GBP/USD settles below the 50 EMA, it will head towards the next support level at the 20 EMA at 1.2325.

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