GBP/USD Daily Forecast – Support At 20 EMA Stays Strong

GBP/USD Video 20.07.20.

U.S. Dollar Under Pressure As EU Recovery Fund Talks Continue

GBP/USD continues to trade near the 20 EMA at 1.2540 as the U.S. dollar is under pressure against a broad basket of currencies.

The U.S. Dollar Index has settled below the 96 level and looks ready for the test of multi-month lows that were reached back in June.

The key topic for currency markets is the ongoing EU summit where bloc’s leaders try to negotiate a recovery fund deal.

In case the agreement is reached, riskier assets will likely get a boost while the U.S. dollar may find itself under additional pressure.

At this point, EU leaders failed to reach consensus as the fiscally frugal Netherlands, Austria, Denmark, Finland and Sweden want to impose significant controls on how the aid package is spent by the hard-hit southern EU countries.

However, it appears that the deal is not dead yet, and the downside trajectory of the American currency signals that traders are optimistic that the deal will be ultimately signed.

Coronavirus also remains a hot topic as the world gets closer to the 15 million cases mark. The U.S. has recorded almost 3.8 million cases since the beginning of the pandemic, and there are no signs of progress in the world’s hardest-hit country.

While the U.S. dollar has served as the safe haven asset of last resort during the current crisis, it looks like gold has taken this role, putting more pressure on the American currency.

Technical Analysis

GBP/USD remains in the local range between the material support at the 50 EMA at 1.2500 and the major resistance at 1.2650. Attempts to settle below the nearest support level at the 20 EMA at 1.2540 are met with increased buying activity.

In case GBP/USD manages to get below the support at the 50 EMA, it will likely develop material downside momentum and head towards the next significant support at 1.2350.

On the upside, GBP/USD needs to settle above the major resistance at 1.2650 to have a chance to establish an upside trend. If this happens, GBP/USD will head towards the next resistance at 1.2750.

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