GBP/USD Daily Forecast – British Pound Gains Ground On Broad U.S. Dollar WeaknessMonetary easing from the Fed and the upcoming U.S. coronavirus aid package put pressure on the U.S. dollar.
Meanwhile, the U.S. continues its efforts to pass the coronavirus aid package. Differences between the positions of Republicans and Democrats remain, but the markets hope that the consensus will be reached today.
I’d note that the projected size of the coronavirus aid package has grown from $1 trillion to $2 trillion. This is a massive amount of money and a bearish factor for the U.S. dollar.
Today, we’ll learn how the virus containment measures have impacted the British economy as Manufacturing PMI and Services PMI data is scheduled to be released. The U.S. will also have a data-heavy day. In addition to PMI, New Home Sales will be reported.
Analysts expect that all of the above-mentioned data will show contraction from previous numbers, and the only intrigue is how bad the actual situation is.
At this point, the unprecedented measures by the Fed and the upcoming massive coronavirus aid packaged have stopped the never-ending dollar upside against a broad basket of currencies.
The U.S. Dollar Index has tried to breach the 104 level several times but failed to move forward and has currently settled below 103. The U.S. Dollar Index has previously been at current levels back at the end of 2016 – 2017.
It topped at roughly the same levels and started a downside move that ultimately brought it below 90 at the beginning of 2018. The move higher than 104 happened back in 2000.
Yesterday, GBP/USD confirmed support below 1.1500. The pair has already made several attempts to settle below this level, and these attempts were met with increased buying activity, which is a bullish sign for GBP/USD.
The near-term resistance for GBP/USD is near 1.1700, while the next resistance level is located at 1.1800. While the pair is trying to bottom out, it has not yet confirmed that it is ready for a new upside trend following the rapid decline in mid-March.
Future trading sessions will heavily depend on whether the above-mentioned QE and coronavirus aid package will lead to additional weakness in the U.S. Dollar Index. If this happens, the test of 1.1800 will be coming soon.