GBP/USD Daily Forecast – U.S. Dollar Remains Strong

GBP/USD Video 24.09.20.

British Pound Remains Under Pressure

GBP/USD continues its attempts to settle below 1.2700 as the U.S. dollar remains strong against a broad basket of currencies amid fears of the second wave of coronavirus.

The U.S. Dollar Index is currently trying to get to the test of the significant resistance level at 94.65. If the U.S. Dollar Index manages to move above this level, it will gain additional upside momentum which will be bearish for GBP/USD.

Yesterday, UK provided flash readings of Manufacturing PMI and Services PMI for September. Manufacturing PMI decreased from 55.2 in August to 54.3 in September while Services PMI fell from 58.8 to 55.1. Numbers above 50 show expansion so the recovery of the UK economy continued, although at a slower pace.

In the U.S., Manufacturing PMI increased from 53.1 to 53.5 while Services PMI declined from 55 to 54.6. The softness in the services segment is seen in all developed economies as continued problems on the coronavirus front hurt consumer sentiment.

Fears about the slowdown of the world economy provide support so safe haven assets and boost the U.S. dollar. In addition, it looks like the short trade in the U.S. dollar was very crowded, and the current rally is partially fueled by shorts who cover their positions.

Technical Analysis

GBP/USD is currently trying to get to the test of the nearest support level at 1.2650. Despite the recent downside move, RSI remains in the moderate territory and there is some room to gain more momentum.

A successful test of this support level will open the way to the test of the next support level at 1.2550. If GBP/USD manages to settle below 1.2550, it will head towards the next support level at 1.2485.

On the upside, the previous support at 1.2750 will serve as the first material resistance level for GBP/USD. If GBP/USD manages to settle above this level, it will gain more upside momentum and head towards the minor resistance level at 1.2780.

A move above 1.2780 will open the way to the test of the next resistance level at 1.2880, although GBP/USD may also face resistance at 1.2815 along the way.

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