GBP/USD Daily Forecast – British Pound Finds Itself Under Pressure

GBP/USD Video 21.05.20.

U.S. Dollar Gains Ground On U.S. – China Tensions

GBP/USD is losing ground as weak inflation data and broader U.S. dollar strength are putting pressure on the pair.

The U.S. dollar is gaining ground against a broad basket of currencies as the market awaits new U.S. Initial Jobless Claims data. Analysts expect that 2.4 million Americans filed for unemployment benefits in a week.

Continuing Jobless Claims are expected to be close to 25 million. Although many weeks have passed since the beginning of the coronavirus crisis, Initial Jobless Claims stay high due to prior backlog and second round of layoffs.

In addition to the U.S. Initial Jobless Claims data, the market will have to digest Flash PMI data for both the UK and the U.S. In both countries, analysts expect to see improvements from previous numbers as the economies have started to reopen.

Adding to the U.S. dollar strength, U.S. President Donald Trump accused China of a “massive disinformation campaign”, increasing fears about a new round of the U.S. – China trade war.

The U.S. dollar is still playing the role of a safe haven asset of last resort so such news are bearish for GBP/USD.

In addition, the U.S. Dollar Index is rebounding from the key support level at 99 and continues to trade in a range between 99 and 101. A move out of this range will lead to increased momentum but so far the U.S. dollar has managed to stay within the above-mentioned limits.

Technical Analysis

In a bearish development, GBP/USD failed to settle above the key resistance level at 1.2250. The next resistance at the 20 EMA is now at 1.2280, so I’d expect that the whole area between 1.2250 and 1.2280 will serve as a major resistance for the pair.

In case GBP/USD manages to settle above the 20 EMA, it will likely gain material upside momentum and head towards the next resistance level at the 50 EMA at 1.2370.

On the support side, the nearest support level is located at 1.2170. If GBP/USD manages to get below this level, it will continue its downside trend and move closer to the recent lows at 1.2080.

The current technical picture is bearish for GBP/USD, and the pair will likely need material upside catalysts to get back to the upside mode.