GBP/USD Daily Forecast – U.S. Dollar Regains Some Ground

GBP/USD Video 24.04.20.

Traders Set To Digest Another Portion Of Economic Data

GBP/USD settled below the 20 EMA at 1.2390 as poor economic data continued to provide support for the U.S. dollar. The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, moved towards the 101 level after it managed to stay above 100 for several days.

The UK has just released data on Consumer Confidence and Retail Sales. In April, Consumer Confidence dropped to -34 compared to the analyst consensus of -40.

Consumer Confidence stayed in the negative zone for several years but accelerated its decline due to coronavirus. The last time Consumer Confidence was that low was back in 2009 during the financial crisis.

March Retail Sales were -5.1% month-over-month compared to the analyst consensus of -4%. Year-over-year data showed a bigger contraction of -5.8% and was also worse than analyst expectations.

However, Retail Sales excluding Fuel showed less contraction which is understandable as virus containment measures led to a decrease in use of transport. It is clear that the data for April will look worse due to the impact of virus containment measures.

In the U.S. , today’s attention will be focused on Durable Goods Orders and Michigan Consumer Sentiment. Analysts expect that Durable Goods Orders declined by -11.9% month-over-month.

However, it is expected that half of the hit was attributed to transportation, so Durable Goods Orders excluding Transportation are expected to show a decline of -5.8%

The depth of the decline of Michigan Consumer Sentiment is especially interesting since traders will get a chance to evaluate the data for April, when the U.S. economy received the biggest blow from coronavirus.

Technical Analysis

GBP/USD did not manage to fully rebound after the recent sell-off and continues to trade below the 20 EMA at 1.2390. This is the first material resistance level for the pair.

In case GBP/USD settles above the 20 EMA, it will head towards the next resistance level at the 50 EMA at 1.2460. The 50 EMA has declined to the level where the pair met heavy resistance on its initial rebound in March, so I’d expect that it will be a very material level for GBP/USD.

On the support side, the nearest support level is located at the recent lows at 1.2250. If this level is breached to the downside, GBP/USD will head towards the next support level at 1.2170.