GBP/USD Daily Forecast – U.S. Dollar Gains Ground As Attention Turns To Economic Woes

GBP/USD Video 08.04.20.

U.S. Dollar Is Showing Strength As Previous Optimism Fades

GBP/USD continues to trade near the 20 EMA level as the market is trying to assess coronavirus-related risks.

Yesterday, the British pound gained ground against the U.S. dollar amid general optimism in the markets. As investors turned to riskier assets, the U.S. dollar was losing ground against a broad basket of currencies, and the U.S. Dollar Index fell below 100.

However, global markets are once again turning their attention to the negative consequences of virus containment measures, and the U.S. Dollar Index has managed to get above 100.

Data from Johns Hopkins University shows that there are 399,886 coronavirus cases in the U.S. and 55,949 cases in the UK. While the pace of new infections has moderated, there’s still a lot of work to do, and it’s hard to expect that virus containment measures will be lifted soon.

Meanwhile, British Prime Minister Boris Johnson, who has coronavirus, has spent his second night in intensive care. As per the comments of Foreign Secretary Dominic Raab, Johnson was receiving oxygen support but his condition was stable.

So far, the condition of the Prime Minister had no material impact on GBP/USD trading, and I expect that it won’t have any impact in the future unless his condition seriously worsens.

No material economic releases are expected today, but U.S. FOMC Minutes will be released. Market participants will digest additional information on how the U.S. Federal Reserve decided to cut rates and which policy measures were on the table.

Technical Analysis

GBP/USD continues to trade near the 20 EMA level. The pair has tested the first resistance level at 1.2385 but failed to get higher and pulled back.

If the resistance level at 1.2385 is breached to the upside, GBP/USD will have a chance to test the major resistance level near the 50 EMA at 1.2480.

However, GBP/USD will first need to stay above the 20 EMA level, as falling below this level will increase chances of a test of the next support level at 1.2170.

At this point, GBP/USD continues to trade in a local downside channel. This downside trend remained intact despite the recent attempts of the British pound to gain ground.