GBP/USD Daily Forecast – Sterling Makes Another Run at the 1.2500 Handle

The US dollar index (DXY) has declined for four straight sessions and is on track for a fifth, underpinning the pound to dollar exchange rate.

GBP/USD was last seen making another attempt to cross over the 1.2500 level after the same area triggered a turn lower earlier in the week.

The Federal Reserve left rates unchanged yesterday which was largely expected. The central bank mentioned on several occasions the need for further fiscal efforts to help support the economy and reaffirmed that it stood ready to act further if needed.

Fed Chair Powell said the Fed will be patient and is not in a hurry to move rates higher after cutting rates to near zero last month.

Later today, the US will release its weekly unemployment claims report. Over 26 million jobs have been lost already in just over a month. Analysts expect today’s report to show another 3.5 million new individuals filing for claims.

Aside from the jobs data, the dollar could see some volatility as the European Central Bank will announce its latest monetary policy decision and hold a press conference. GBP/USD stands to be impacted if there are major swings in the greenback.

Technical Analysis

GBP/USD is trying to cross over the 1.2500 where there is a fair amount of resistance. A horizontal level at 1.2523 will be the main hurdle for bulls.

A cross above it could pave the way for a retest of the April high near 1.2650 where the 200-day moving average currently resides.

However, the pair has mostly traded sideways in April and the current move has not provided any indication at this point that the pair has turned bullish.

The current move up may turn out to be a bear flag although a decline below support at 1.2417 is needed to call it so.

Bottom Line

• The ECB meeting and US weekly unemployment claims figures stand to trigger volatility in the second half of the European session.
• The next major hurdle for GBP/USD comes in at 1.2523. A break of it could open up the way for a retest of monthly highs near 1.2650.