GBP/USD Daily Forecast – Resistance At 1.2650 Stays Strong

GBP/USD Video 16.07.20.

Demand For Safe Haven Assets Increases As China’s Retail Sales Disappoint

GBP/USD is losing ground after another unsuccessful attempt to settle above 1.2650 as the U.S. dollar rebounds against a broad basket of currencies.

The U.S. Dollar Index found support below the 96 level and tries to gain some upside momentum. Continued tensions between U.S. and China as well as weak China’s retail sales provide support to safe haven assets like the U.S. dollar.

China’s retail sales declined by 1.8% in June while analysts expected growth of 0.3%, highlighting the long-lasting weakness in consumer activity. This is a warning sign for economies which are more dependent on consumer activity like the U.S.

The UK has just released the Claimant Count Change report for June. The report was much better than expected at -28,100 compared to analyst consensus of 250,000.

Unemployment Rate for May was also better than expected at 3.9% compared to analyst consensus of 4.2%.

Today, the U.S. will provide several reports which have the potential to move the markets.

U.S. Retail Sales are expected to increase by 5% month-over-month in June. A recent Reuters report suggested that those who received unemployment benefits spent more than when they were working so the Retail Sales report has the potential for a positive suprise.

That said, markets may focus on the future when the generous unemployment benefits will come to an end.

In addition, the U.S. will release new Initial Jobless Claims and Continuing Jobless Claims reports. Initial Jobless Claims are expected to stay high at 1.25 million while Continuing Jobless Claims are projected to drop to 17.6 million.

Technical Analysis

GBP/USD has once again tested the high end of the current trading range at 1.2650 but failed to settle above this resistance level. As a result, GBP/USD has declined back towards the nearest support level at the 20 EMA at 1.2530.

In case GBP/USD moves below this level, it will head towards the major support level at the 50 EMA at 1.2490.

A move below the 50 EMA will allow GBP/USD to gain more downside momentum and start a new near-term downside trend which can take it closer to the low end of the current trading range at 1.2250.

On the upside, the resistance at 1.2650 remains a true wall for GBP/USD which needs significant upside catalysts to settle above this level.

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