GBP/USD Daily Forecast – Resistance At 1.2650 In Sight

GBP/USD Video 03.06.20.

Focus On Recovery Provides Support To The British Pound

GBP/USD continues its upside move as traders favor riskier currencies and get rid of the U.S. dollar.

The U.S. dollar is losing ground against a broad basket of currencies, and the U.S. Dollar Index remains under pressure. Currently, the U.S. Dollar Index has settled below 97.5.

The downside move in the U.S. Dollar Index started when it broke through the major support level at 99. After this, the U.S. dollar did not have a single positive day.

The reason for the U.S. dollar weakness is the traders’ focus on the upcoming recovery which allows them to ignore bad news like the protests in the U.S. or the worsening U.S. – China relations.

UK – China relations are also under question as the UK Prime Minister Boris Johnson has stated that UK was ready to change its immigration rules in case China imposed the national security law on Hong Kong.

For now, the global markets do not believe that the situation in Hong Kong will lead to serious measures from U.S. and UK as well as the corresponding counter-measures from China.

The first half of the week was light on economic data. However, the markets will soon have to digest U.S. employment reports, starting with ADP Employment Change on Wednesday.

Technical Analysis

GBP/USD continues to enjoy significant upside momentum. The nearest resistance for GBP/USD is located at the high of the two previous upside moves, at 1.2650.

This resistance is the high of the trading range between 1.2250 and 1.2650. A move out of this range may lead to increased upside momentum. In this scenario, GBP/USD will head towards the test of the next resistance level at 1.2750.

The main problem for additional upside is that GBP/USD rallied from 1.2350 to 1.2600 without any pullback, so it may lack immediate momentum to deal with the significant resistance at 1.2650.

On the support side, the nearest support is located at 1.2500. In case GBP/USD settles below this support level, it may gain downside momentum and head towards the 50 EMA at 1.2370.

The previous downside moves from the 1.2600 – 1.2650 were fast so traders should closely monitor whether GBP/USD will be able to settle close to 1.2600 without losing upside momentum.

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