GBP/USD Daily Forecast – British Pound Tries To Rebound After Sell-OffGBP/USD declined below 1.2600 after major sell-off and attempts to regain some ground.
GBP/USD Video 12.06.20.
Fears Of Second U.S. Coronavirus Wave Emerge
GBP/USD declined below 1.2600 as riskier assets were under pressure globaly due to Fed’s grim economic forecast and fears about the second wave of coronavirus in the U.S.
The number of coronavirus cases has been rising rapidly in some states, which some observers attribute to improved testing. However, the number of hospitalizations was also increasing.
U.S. Treasury Secretary Steven Mnuchin has stated that the U.S. cannot shut down the economy again, so the markets will watch U.S. coronavirus numbers closely in the next few weeks.
UK has just released economic data for April. Not surprisingly, it looks awful. GDP was down 24.5% year-over-year in April compared to analyst consensus which called for a decline of 22.6%.
Industrial Production and Manufacturing Production also fell deeper than analysts predicted. Industrial Production was down 24.4% year-over-year in April, while Manufacturing Production declined by 28.5%.
Most likely, the UK will follow the U.S. example and keep rates near zero for years.
GBP/USD tries to rebound after the major sell-off which took it below 1.2600. The nearest resistance for GBP/USD is located at the previous support level at 1.2630.
I’d note that GBP/USD encountered some support at this level on its way down so it’s a rather important level but the strength of yesterday’s downside move was very significant and minor support levels had little chance to stop the decline of GBP/USD.
In case GBP/USD manages to settle above 1.2630, it could gain more upside momentum and head towards the next resistance level at 1.2750. At this point, yesterday’s move is still a simple sell-off rather than a change in trend, but risks of a downside trend will increase in case GBP/USD is not able to quickly rebound to recent highs.
On the support side, the nearest material support for GBP/USD is located at 1.2500 although some additional support may be provided at the 20 EMA at 1.2525.
In case GBP/USD moves below 1.2500, it will gain more downside momentum and head towards the 50 EMA at 1.2450.
For a look at all of today’s economic events, check out our economic calendar.