GBP/USD Daily Forecast – Global Optimism Boosts The British Pound

GBP/USD Video 27.04.20.

British Pound Gains Ground As Traders Favor Riskier Assets

GBP/USD moved closer to the 50 EMA level at 1.2460 as traders and investors expressed optimism on the reopening of the world economies.

The U.S. dollar is under pressure, and the U.S. Dollar Index, which measures the U.S. dollar strength against a broad basket of currencies, has fallen below the psychologically important 100 level.

The Telegraph reported that UK Prime Minister Boris Johnson will soon announce plans to reopen the economy. The plan is expected to outline a gradual, step-by-step approach.

In the U.S., certain states have already started lifting some virus containment measures. According to data from Johns Hopkins University, the U.S. has accumulated 965,910 coronavirus cases, so it will soon pass the 1 million mark.

There’s a hot debate on whether some states are reopening their economies too soon but the economic pressure mounts and many people want to get back to work to earn money so that they can pay their bills.

According to Kevin Hasset, an economic adviser to U.S. President Donald Trump, the U.S. unemployment rate could reach 16% or higher, so more monetary stimulus will be necessary to ensure a rebound.

Currently, the U.S. equity market is focused on monetary stimulus rather than near-term economic damage, and S&P 500 futures are indicating solid gains in premarket trading.

This risk-on mood is present on many markets and helps the British pound gain ground against the U.S. dollar. With no major economic releases scheduled for today, market sentiment will be the main catalyst for GBP/USD.

Technical Analysis

GBP/USD is trying to get above the 50 EMA level at 1.2460 as traders favor riskier assets on hopes that leading economies will be reopened soon. In case GBP/USD manages to settle above the 50 EMA, the pair will head towards the next important resistance level near the recent highs at 1.2650.

On the support side, the 20 EMA at 1.2400 serves as the first material support level for GBP/USD. If GBP/USD moves below 1.2400, it will head towards the next support level near recent lows at 1.2250.

I’d note that GBP/USD may face some resistance at 1.2500 after it breaches the 50 EMA level at 1.2460, but if the pair goes past this level, it may gain additional upside momentum and quickly reach 1.2650.