GBP/USD Daily Forecast – Sterling Struggles to Gain on a Broadly Weaker Dollar

This week continues to be the story of the dollar as it has been broadly influencing the direction of the major currencies. Today, however, the British pound has diverged from the pattern and is showing weakness despite a pullback in the dollar.

GBP/USD briefly rallied to a high above the 1.2500 handle earlier this week but failed to sustain the break and has since fallen a 100 pips lower.

Where the pair moves from here is likely to depend on today’s GDP report and Fed decision.

Analysts are expecting GDP to have declined by an annualized 4% in the first quarter as the Coronavirus and the lockdown has weighed on the US economy.

The Federal Reserve concludes its three-day meeting today and will announce policy decisions as well as hold a press conference.

The central bank is widely expected to remain on hold after having already delivered easing measures to help combat the negative economic impacts of the virus.

There has not been any economic data of significance out of the UK today and therefore the focus will remain on the events out of the US.

Technical Analysis

GBP/USD has seen a significant decline in volatility since the start of the month and a range has formed since.

Resistance at 1.2523 has capped the rally in the week thus far while broader range support at 1.2243 held a decline last week. It will likely take a break out of this range to see volatility start to rise again.

For the session ahead, support is found at 1.2400 and the pair was last seen near it. A break below it might suggest that the recovery that has been taking place since Friday has ended which could result in a drop back towards range support.

To the upside, bulls will want to see a break above 1.2523 to confirm that the uptrend from Friday’s low is still intact.

Bottom Line

• GBP/USD has been under performing the major currencies and has retreated about 100 pips from the week’s highs.
• US GDP data and the Fed decision later today stand to introduce some volatility into the markets.