GBP/USD Daily Forecast – British Pound Continues To RallyGBP/USD managed to settle above the resistance at 1.2815 and continues its upside move.
GBP/USD Video 27.07.20.
U.S. Dollar Remains Under Material Pressure
GBP/USD has managed to settle above 1.2800 as the U.S. dollar remained under serious pressure against a broad basket of currencies.
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The U.S. Dollar Index declined below March lows at 94.65 and gained additional downside momentum. Currently, it is trying to settle below the 94 level.
At this point, safe haven buying has shifted to gold, which rallied to record highs on both spot and futures basis.
Continued problems on the coronavirus front, deterioration in U.S. – China relations and the upcoming new coronavirus aid package put pressure on the American currency and pushed precious metals higher.
The new coronavirus aid package is expected to include $1200 in direct payments for August. At the same time, unemployment benefits are projected to be reduced to no more than 70% of workers’ previous pay.
In total, the new plan is valued at $1 trillion, which means that more money will be printed. Currently, it looks like the U.S. dollar is no longer invincible from devaluation worries, especially after EU has successfully negotiated its own coronavirus recovery fund deal.
In addition, U.S. bond yields are low and the spread with EU bonds has decreased, making the U.S. dollar more vulnerable to downside pressure.
GBP/USD managed to get above the high of the previous upside move at 1.2815 and continues to move higher.
RSI is at high levels but has not reached the extremely overbought territory, which leaves some room to build more momentum.
The nearest resistance is located at 1.2880. A move above this level will open the way to the next resistance at 1.2980.
On the support side, the previous resistance at 1.2815 will likely serve as the first support level for GBP/USD.
In case GBP/USD declines below 1.2815, it will head towards the major support level at 1.2750.
Currently, GBP/USD has good chances to establish a significant upside trend in case the U.S. dollar remains weak against a broad basket of currencies.
The main risk for GBP/USD bulls is the oversold condition in the U.S. Dollar Index which can lead to a material rebound of the U.S. dollar and put pressure on GBP/USD.
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