GBP/USD Daily Forecast – Flight To Safety Amid Bad DataGBP/USD pulls back as investors and traders favor safe haven assets following the release of disappointing economic data.
GBP/USD Video 16.04.20.
Major Decrease In U.S. Retail Sales Boosts U.S. Dollar
GBP/USD pulled back after the previous upside move due to the major flight to safety after the release of the U.S. Retail Sales data. In March, the U.S. Retail Sales declined by 8.7% compared to the analyst consensus which called for a decline of 8%.
75% of retail CFD investors lose money
While the global markets have previously ignored bad economic data, they were unable to brush off another portion of bad news. The disappointing Retail Sales data led to increased purchases of safe haven assets, boosting the U.S. dollar.
The U.S. Dollar Index, which has recently been below the 99 level, is currently testing the psychologically important 100 level, highlighting the U.S. dollar strength against a broad basket of currencies.
Today, market participants will get another portion of bad data since the U.S. will report Initial Jobless Claims. The previous week’s release showed that as much as 6.6 million of Americans filed for unemployment benefits.
For this week, analysts expect 5.1 million of Initial Jobless Claims. If this forecast is correct, job losses in the U.S. will total almost 22 million in just four weeks. Clearly, the coronavirus caused an unprecedented hit to the economy.
Traders and investors watch for any signals that may hint when life will start gradually returning to normal. In the UK, government officials stated that the medical data was encouraging but that it was too soon to lift current virus containment measures.
As I indicated in my previous article on GBP/USD, the pair met resistance at 1.2650. Failure to settle above this resistance combined with the broader strength of the U.S. dollar led to a material pullback from this level.
As a result, GBP/USD is currently trading near the 50 EMA level at 1.2500. In order to continue the previous upside move, the pair will have to settle above the 50 EMA.
In this case, the previous resistance at 1.2650 will serve as the biggest obstacle on the pair’s way to pre-crisis levels at 1.2750.
On the support side, the 20 EMA at 1.2400 serves as the first major support for the pair. Should GBP/USD settle below this level, it may attempt to move towards the next major support level at 1.2170.