GBP/USD Daily Forecast – Flat Above Support At 20 EMA

GBP/USD Video 17.07.20.

Demand For Riskier Assets Under Question As The Number Of New COVID-19 Cases Surge

GBP/USD stays above the 20 EMA at 1.2535 as the U.S. dollar is flat against a broad basket of currencies despite the surge in the number of new coronavirus cases and increasing U.S. – China tensions.

The U.S. Dollar Index has settled above the 96 level after an unsuccessful attempt to get below June lows. The American currency is supported by increase in demand for safe haven assets which is driven by the worsening situation on the coronavirus front.

On Thursday, the U.S. has reported more than 77,000 new cases which was an all-time high. Elsewhere in the world, Brazil crossed the 2 million cases mark while India registered more than 1 million cases since the beginning of the pandemic.

According to a Reuters report, U.S. officials are discussing the possibility of banning all Chinese Communist Party members from travelling to U.S. If this idea is implemented, U.S. – China relations will hit a new low, increasing risks for the fragile economic recovery.

Worries about virus and another round of trade war between U.S. and China are offset by positive economic data. Yesterday, the U.S. reported that Retail Sales grew by 7.5% month-over-month while analysts expected growth of just 5%.

However, the strong rebound of consumer activity may hit an obstacle as generous unemployment benefits are set to expire at the end of July while the increase in the number of new coronavirus cases puts consumer sentiment at risk.

Technical Analysis

GBP/USD has settled above the 20 EMA at 1.2535 which serves as the first material support level. In case GBP/USD settles below the 20 EMA, it will head towards the next support level at the 50 EMA at 1.2490.

A move below the 50 EMA will be bearish for GBP/USD and signal the beginning of the local downside trend. In this scenario, GBP/USD may gain additional downside momentum and head towards the next material support level at 1.2350.

On the upside, the high end of the current trading range at 1.2650 is a very strong resistance level for GBP/USD. Most likely, broader U.S. dollar weakness will be necessary for GBP/USD to get above this level.

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