GBP/USD Daily Forecast – Second Attempt To Settle Above 1.2250

GBP/USD Video 28.05.20.

U.S. Dollar Is Under Pressure As Demand For Safe Haven Assets Decreases

GBP/USD experienced wild action in the previous trading session as doubts about an orderly Brexit put significant pressure on the British pound. As a result, GBP/USD declined closer to 1.2200 after testing resistance at 1.2350.

Today, GBP/USD returns to the upside mode and is trying to settle above the key level at 1.2250.

The U.S. dollar is losing ground against a broad basket of currencies, and the U.S. Dollar Index is trying to settle below the important support at 99.

The U.S. Dollar Index spent the last two months between 99 and 101, and a move out of this range will lead to increased momentum. GBP/USD will likely have notable upside in case U.S. Dollar Index moves towards 98.

Currently, the optimism about the reopening of the world economy is somewhat offset by the worries about potential U.S. sanctions on China. At this point, the optimism prevails, and the demand for safe haven assets like the U.S. dollar decreases.

Today, this optimism will get tested by another portion of U.S. economic data. Traders will digest the second estimate of the first-quarter GDP Growth Rate, as well as the new data on Initial Jobless Claims and Continuing Jobless Claims.

Technical Analysis

GBP/USD met significant resistance at 1.2350 and fell back towards 1.2200 before rebounding above 1.2250. This significant volatility was caused by worries about Brexit.

Currently, GBP/USD is trying to settle above the support level at 1.2250. In case this attempt is successful, GBP/USD will have good chances to test the nearest major resistance near the 50 EMA at 1.2350.

If the test of the next resistance level is successful, GBP/USD will gain additional upside momentum and head towards the next resistance level at 1.2450. Such a move will signal that GBP/USD has firmly returned back into the previous trading range between 1.2250 and 1.2650.

On the support side, the main interest is still found at 1.2250. In case GBP/USD settles below this level, it will likely head towards the test of the next support area between 1.2170 and 1.2200.

While the recent move below 1.2250 did not encounter strong support at this level, it was a news-driven sell-off so there’s material chance that 1.2250 will continue to serve as an important support level for GBP/USD.

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