GBP/USD Daily Forecast – Support At 1.2250 Remains The Key Level

GBP/USD Video 01.07.20.

The Test Of The Key Support Level Was Unsuccessful

GBP/USD has rebounded from the support level at 1.2250 and settled above 1.2350. Yesterday, markets were optimistic on signs that recovery is going faster than expected.

Today, this optimism will be tested by the bad news on the coronavirus front. The U.S. has recorded the biggest one-day increase in the number of coronavirus cases, which could trigger fears about a new series of lockdowns.

Currently, the U.S. dollar is flat against a broad basket of currencies after very volatile trading on Tuesday, and the U.S. Dollar Index has settled near the key 97.5 level.

A move above this level will likely lead to increased upside momentum for the U.S. dollar and serve as a bearish catalyst for GBP/USD. The U.S. Dollar Index has already made several attempts to settle above 97.5 but each attempt met heavy resistance.

In addition to coronavirus news, the market’s risk appetite will be tested by the release of U.S. ADP Employment Change report for June which is expected to show that the private sector added 3 million jobs.

The U.S. will also release the final reading of Manufacturing PMI which is expected to increase from 39.8 in May to 49.6 in June.

Technical Analysis

GBP/USD failed to settle below the low end of the current range at 1.2250 and quickly rebounded above 1.2350. Despite the rebound, GBP/USD remains in the local downside trend and stays in a downside channel.

In order to get out of the downside channel, GBP/USD will have to get above the 20 EMA and the 50 EMA at 1.2435. A move above this level will likely lead to increased downside momentum and take GBP/USD closer to the next resistance level at 1.2530.

On the support side, the nearest support level for GBP/USD is located at 1.2350. In case GBP/USD manages to settle below this level, it will head towards the low end of the current range at 1.2250.

From a big picture point of view, GBP/USD has once again proved that it continues to trade in a wide range between 1.2250 and 1.2650. GBP/USD will surely need significant catalysts to get out of this range and establish a new trend.

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