GBP/USD Daily Forecast – U.S. Dollar Fails To Gain More Upside Momentum

GBP/USD Video 04.08.20.

U.S. Democrats And Republicans Make Some Progress In Coronavirus Aid Package Talks

GBP/USD has settled below 1.3100 as the U.S. dollar remained flat against a broad basket of currencies while traders awaited results of U.S. coronavirus aid package negotiations.

The U.S. Dollar Index has settled near 93.5 after an unsuccessful attempt to get above the 94 level.

This is an important moment for the American currency since failure to develop upside momentum above the 94 level will lead to increased pressure and a possible re-test of lows at 92.5. Such scenario would be bullish for GBP/USD.

On Monday, Republicans and Democrats continued their talks on the new coronavirus relief package. Some progress has been made but the aid deal will still require more negotiations.

There is little doubt that U.S. economy needs another massive stimulus to support consumer activity. However, it remains to be seen how the currency market will react to another round of money-printing.

In addition to coronavirus aid bill, traders will likely pay attention to increased tensions between U.S. and China. The U.S. has pushed China’s ByteDance to sell TikTok’s U.S. operations to Microsoft, and China has already stated that it had ways to respond.

Technical Analysis

GBP/USD made an attempt to settle below the support level at 1.3020 but did not manage to gain additional downside momentum and rebounded above the support at 1.3070.

On the upside, GBP/USD faced some resistance near 1.3110. In case GBP/USD manages to settle above this resistance level, it will likely gain additional upside momentum and head towards the next resistance level at 1.3200. Most likely, such scenario would require broad U.S. dollar weakness.

RSI has left the extremely overbought territory but remains elevated so GBP/USD may need to stabilize near current levels before making another move.

From a big picture point of view, GBP/USD continues to trend higher in an upside channel. The recent attempt to gain downside momentum has failed, and GBP/USD maintains good chances to continue the current upside trend.

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