GBP/USD Daily Forecast – British Pound Gets Support From Multiple Catalysts

GBP/USD Video 21.07.20.

EU Deal, Vaccine Hopes And Brexit Optimism Provide Support To British Pound

GBP/USD managed to get above the major resistance level at 1.2650 as EU leaders agreed to a historic recovery fund deal while the U.S. dollar remained flat against a broad basket of currencies.

After almost five days of intense negotiations, EU leaders signed a recovery fund deal which should provide support to EU members as their economies try to rebound after the acute phase of the coronavirus crisis.

The recovery fund will be able to use 750 billion euros, including 390 billion of non-repayable grants. In addition to the recovery fund, EU leaders agreed to EU 2021 – 2027 budget of 1.1. trillion euros.

In addition to EU deal, the risk sentiment is supported by hopes for a COVID-19 vaccine. Yesterday, AstraZeneca reported encouraging early-stage trial results of its vaccine while CanSino Biologics’ vaccine showed positive results in a mid-stage study.

British pound is also supported by Brexit hopes after German Foreign Minister Heiko Maas signaled that it was possible to reach an agreement between EU and Britain by October.

At this point, British pound enjoys the support of multiple positive catalysts which provide it with a chance to settle above the major resistance at 1.2650 and establish a new upside trend.

Technical Analysis

GBP/USD settled above the key resistance level at 1.2650 and continues its upside move. The nearest resistance for GBP/USD is located at 1.2750.

In case GBP/USD manages to get above this level, it will gain additional upside momentum and head towards the test of the next resistance level at 1.2815, which is the high of the previous attempt to settle above 1.2650.

As I noted above, GBP/USD is supported by multiple catalysts and has good chances to establish an upside trend. To do this, it will have to stay above the key level at 1.2650.

In case GBP/USD moves below 1.2650, it will likely gain significant downside momentum and head towards the next support level at the 20 EMA at 1.2560. Such a move would signal that GBP/USD experienced another false breakout of the key resistance level.

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