GBP/USD Daily Forecast – British Pound Is Back To The Upside Mode

GBP/USD Video 16.06.20.

Fed’s Decision To Buy Individual Corporate Bonds Boosts Riskier Assets

GBP/USD is trying to settle back above 1.2650 as the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index failed to stay above the 97 and declined to 96.5 as the U.S. Federal Reserve announced that it would start purchases of up to $250 billion in individual corporate bonds.

This announcement provided material support for riskier assets and put pressure on safe haven assets like the U.S. dollar. The Fed has once again confirmed that it is ready to expand its programs if necessary, which is bearish for the U.S. dollar.

The UK has just provided new employment reports. Unemployment Rate was 3.9% in April compared to analyst consensus of 4.7%. The more timely gauge of the employment situation, Claimant Count Change for May, was 528,900 compared to analyst consensus of 400,000.

This Thursday, the Bank of England will announce its interest rate decision and provide update on the size of its quantitative easing program. Currently, analysts expect that the program will be expanded from 645 billion pounds to 745 billion pounds. Such an expansion looks very likely given the recent Fed’s move.

Technical Analysis

GBP/USD has quickly rebounded from 1.2450 and is trying to settle above 1.2650. At the beginning of June, GBP/USD spent some time above this level but experienced a material sell-off and returned back to the trading range between 1.2250 and 1.2650.

This time, GBP/USD makes a second attempt to settle above 1.2650 and establish an upside trend. If this attempt is successful, GBP/USD will head towards the test of the next resistance level at 1.2750.

On the support side, the nearest support for GBP/USD is located at the 20 EMA near 1.2550. It remains to be seen whether this support will be significant since GBP/USD has mostly ignored the 20 EMA level since both the recent downside move and the rebound were very fast.

In case GBP/USD gets below the 20 EMA, it will likely gain downside momentum and head towards the 50 EMA at 1.2470. The 50 EMA level has already been tested and proved its strength so I’d expect that GBP/USD will get significant support at 1.2470.

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