GBP/USD Daily Forecast – U.S. Dollar Gains Ground On Increased Demand For Safe Haven Assets

GBP/USD Video 21.04.20.

Yesterday’s Historic WTI Oil Move Hurts Global Markets And Helps The U.S. Dollar

GBP/USD continues to pull back amid rush for safety provoked by a historic downside move in WTI May contract which went deep into the negative territory yesterday.

The U.S. dollar is gaining ground against a broad basket of currencies, and the U.S. Dollar Index has firmly settled above the 100 level.

I’d note that volatility has decreased significantly over the last few weeks, and currency moves have become more measured. This means that central banks’ efforts to ensure liquidity in different currencies are positively impacting the markets.

UK has just released the Claimant Count Change for March, which measures the change in the number of claimants for unemployment benefits. The report showed that 12,200 people filed for unemployment benefits, which is much smaller than the consensus estimate of 175,000.

It’s too early to tell what impacted the data, but it is clear that unemployment should have increased much bigger in March due to virus containment measures.

Near-term dynamics of GBP/USD will depend on the general demand for safe haven assets which significantly impacts the position of the U.S. dollar against a broad basket of currencies.

As I noted above, volatility is declining, but another portion of bad data may change this picture. On Thursday, April 23, the U.S. will release the weekly Initial Jobless Claims which are expected to show that 4 million of Americans filed for unemployment benefits, putting the total number of people who lost their jobs in the U.S. above 26 million.

Previously, the markets were able to shrug off the bad U.S. employment data, but it may become harder to do as the crisis unfolds.

Technical Analysis

GBP/USD tries to break out of the range between the 20 EMA at 1.2420 and the 50 EMA at 1.2480. In case the pair manages to settle below the 20 EMA, it will head towards the next support level at 1.2350.

On the way up, the nearest resistance is located at the 50 EMA at 1.2480. If GBP/USD breaks through this resistance level, it will have a good chance to test the recent highs at 1.2650.

However, GBP/USD will first have to deal with a minor resistance level at 1.2525 which has already been tested several times.