GBP/USD Daily Forecast – British Pound Holds Well Despite U.S. Dollar Attempt To Rebound

UK Q4 GDP Growth Rate Is Flat Quarter-Over-Quarter

The U.S. dollar tried to gain ground against the British pound but GBP/USD received support near the 20 EMA at 1.2250.

The number of coronavirus cases in the U.S. continued to increase and reached 164,603 according to data from Johns Hopkins University. No additional virus containment measures have been announced at this time. In the UK, 22,454 coronavirus cases have been recorded so far.

UK has just reported important data on GDP Growth Rate. Fourth-quarter GDP Growth Rate was flat compared to third-quarter. Year-over-year data showed an increase of 1.1%. Both numbers were in line with analyst consensus.

The UK economy was losing momentum in the fourth quarter of 2019, and has certainly dipped into recession in the first quarter of 2020 due to virus containment measures and disruption elsewhere in the world.

In the U.S., data on S&P/Case-Shiller Home Price Index and Chicago PMI is expected to be released later in the day. Chicago PMI data is especially interesting since it will indicate the size of the blow to economy in March.

The February Chicago PMI came at 49 (numbers below 50 indicate contraction), while the consensus for March Chicago PMI is 40.

The U.S. Dollar Index tries to continue its rebound following days of downside action but has to deal with material resistance near the psychologically important 100 level. If the U.S. Dollar Index stays below 100, GBP/USD will likely receive additional support.

Technical Analysis

GBP/USD stays in the current upside channel so the upside trend is intact. The support level at 20 EMA at 1.2250 was tested and successfully confirmed. If GBP/USD manages to get below the 20 EMA, it could head towards the next support level at 1.2000.

On the upside, the area near the 50 EMA at 1.2500 remains a material resistance level for GBP/USD. This area has already been tested several times, and each time the pair met heavy resistance.

However, if GBP/USD continues its rebound from the low end of the current upside channel, it will once again test the resistance near 1.2500. If this test is successful, the pair will have an opportunity to continue the existent upside trend.