GBP/USD Daily Forecast – Risk-On Mode Takes The Pair Above 1.2200

Broad Sell-Off In The U.S. Dollar Helps The British Pound Continue Its Rebound

We live at times of huge volatility. Just yesterday, I wrote that GBP/USD will have an open road to the 20 EMA at 1.2240 if it managed to get past 1.1930, and today this move has already happened.

U.S. Initial Jobless Claims showed a record increase on Thursday, but the markets ignored it completely, leading to heavy buying in various risk assets. As a result, the U.S. Dollar Index breached the 100 level to the downside and has currently settled near 99.

Meanwhile, the U.S. became the world leader in the number of coronavirus cases. According to data from Johns Hopkins University, the U.S. currently has 85,840 cases, while China has 81,872 cases and Italy has 80,589.

It remains to be seen whether the virus spread trend in the U.S. will lead to risk-off mode in the markets. Another big question is whether the U.S. dollar will maintain the status of the safe haven asset of last resort if the situation in the U.S. continues to worsen.

Today, we won’t get much economic data in U.S. and UK. In the U.S., numbers for Personal Income, Personal Spending and Personal Consumption Expenditures Index are expected to be released. The data is for February so it is almost meaningless in the current situation.

UK will report Nationwide Housing Prices and Car Production, which are also not the most important releases in today’s environment.

Technical Analysis

GBP/USD has currently settled above the 20 EMA and continues its upside move. The pair will likely find support in the 1.2190 – 1.2210 area. Staying above the 20 EMA is crucial for the continuation of the rebound since the latest move was so fast that there are no significant near-term support levels in the nearby.

On the upside, the pair is facing resistance at the high end of the current upside channel at 1.2300, followed by another resistance level at 1.2400. The ultimate goal of the current rebound, if it manages to continue, is at the 50 EMA near the 1.2530 level.

I’d note that GBP/USD had a major rally in recent days so traders will have to watch carefully for any weakness as the pullback may be significant, just like it happened in USD/CAD in recent days.