GBP/USD Daily Forecast – Sterling Clings Onto 20 DMA Despite a Stronger Dollar

GBP/USD held relatively unchanged shortly after the European open on Tuesday despite poor data and as the dollar extended gains.

Survey data from purchasing managers in the UK showed a further slump in the services industry as the virus outbreak continues to weigh on the economy. IHS Market reported the services PMI at 13.4 after readings above 50 in the first three months of the year.

Tim Moore, Economics Director at IHS Markit said: “The downturn in the UK economy during the second quarter of 2020 will be far deeper and more widespread than anything seen in living memory”.

Aside from brushing off the PMI report, GBP/USD has not been impacted by a stronger dollar. The US Dollar index is set to post a second day of gains and has wiped out most of the losses from last week.

The greenback was boosted today by a court decision in Germany that questioned whether the ECB’s mass bond-buying is justified. The decision put pressure on the Euro which in turn lifted the dollar.

The US will release PMI figures for the services and non-manufacturing industries in the early North American session.

Technical Analysis

GBP/USD found a bottom at 1.2406 support on Monday and the level remains a key price point to the downside for the session ahead.

The pair has printed a bearish candle on a 4-hour chart that has wiped out a bulk of the gains during the Asian session which set a somewhat bearish note.

At the same time, the fact that the pair has been able to stave off losses despite a rising dollar and poor UK PMI data is an indication of strength.

The pair will need to rally above the current session high at 1.2483 to encourage bulls. In such a scenario, there is a hurdle at 1.2519 for the session ahead.

A break of support at 1.2406 stands to accompany an acceleration in downward momentum which could lead to a test of the 1.2292 price point.

The 20-day moving average is in play and is currently found at 1.2446. The pair managed to close above it yesterday and bulls will want to see the pair continue to hold above the indicator in the session ahead.

Bottom Line

• GBP/USD shows some underlying strength as poor UK data and a stronger dollar have not pushed the pair lower.
• PMI data will be released out of the US later in the day.