GBP/USD Daily Forecast – Support At 1.2170 In Sight

GBP/USD Video 25.05.20.

U.S. – China Tensions Provide Support To The U.S. Dollar

GBP/USD is flat in a quiet trading session as the financial markets in the U.S. and UK are closed for holidays.

The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has settled near the 100 level. In recent days, the U.S. dollar was supported by increasing U.S. – China tensions due to Hong Kong security law.

The U.S. has already signaled that the implementation of the law may lead to U.S. sanctions, worsening an already challenging relationship between the two biggest economies at a time when the world economy tries to recover from the acute phase of the coronavirus crisis.

In the UK, the week is set to be quiet on the economic data front. In the U.S., the key economic reports are the second estimate of the first-quarter GDP Growth Rate and the new Initial Jobless Claims data which are both scheduled to be published on Thursday.

GDP Growth Rate is expected to shrink by 4.8% while the Initial Jobless Claims report is projected to show that 2 million of Americans filed for unemployment benefits in a week.

Technical Analysis

GBP/USD has settled near the first material support level at 1.2170. If this level is breached to the downside, GBP/USD will likely gain additional downside momentum and head towards the next support level at the recent lows at 1.2080.

In this scenario, GBP/USD should have better chances to get below the support at 1.2080. In case it happens, the pair will likely decline further towards 1.2000.

I’d note that GBP/USD has recently failed to settle above the key resistance level at 1.2250 and confirmed the existing downside trend. As long as GBP/USD stays below 1.2250, the risks are shifted to the downside.

On the upside, the above-mentioned major resistance at 1.2250 is the first important resistance level for GBP/USD.

If GBP/USD manages to settle above this level and above the 20 EMA which has declined to the same area, it will gain material upside momentum and head towards the next resistance level at the 50 EMA at 1.2350.

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