GBP/USD Daily Forecast – Sterling Declines to Fresh Six-Month Lows

A sharp push lower in GBP/USD over the last week shows the pair trading at lows not seen in six-months to erase a bulk of the recovery that took place in the second half of 2019.

The UK has started to take a stricter stance towards the Coronavirus although it can be argued that the UK government could do more. PM Johnson announced at a press conference yesterday that the NHS will no longer support emergency services for large gatherings and recommended citizens to avoid pubs and bars.

While the UK appears to support “social distancing” it has stopped short of banning large events or shutting down public establishments which other countries have started to do.

Johnson changed towards a more cautious stance after a report from Imperial College showed that half a million UK citizens could have died if no action was taken.

The US dollar has regained its safe-haven status as investors flock to the currency and flee from the equity markets. The US dollar index (DXY) has recovered after showing a 3.5% loss earlier this month and is currently in positive territory for March.

The UK jobs market took a hit in the three month to January after the employment rate reached a record high in the prior reading. The unemployment rate was reported to tick up to 3.9% and unemployment claims rose to 17,300 from 5,500 people claiming benefits in the prior month.

US retail sales figures will be reported later in the day although the impact is expected to be minor considering the period reported was ahead of the escalation in the Coronavirus.

Technical Analysis

GBP/USD made a notable technical break last week after falling through 1.2751 support as well as its 200-day moving average. The momentum has largely been to the downside since.

The next area of interest falls at 1.2014 which is the level that triggered the turn higher in 2019. To the upside, near-term resistance is found at 1.2373.

Bottom Line

• The British pound remains strongly offered as the pair heads towards 2019 lows.
• UK unemployment came in a bit softer than expected, although the employment rate continues to remain near record levels.