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GBP/USD Daily Forecast – U.S. Dollar Suffers From Its Safe Haven Status

By:
Vladimir Zernov
Published: May 19, 2020, 07:06 UTC

GBP/USD returns back above 1.2200 as vaccine hopes provide support to riskier assets.

GBP/USD

In this article:

GBP/USD Video 19.05.20.

British Pound Gets A Boost From Global Market Optimism

GBP/USD is rebounding as the U.S. dollar is under pressure due to hopes for a vaccine for COVID-19.

The U.S. dollar is losing ground against a broad basket of currencies, and the U.S. Dollar Index has returned back under the 100 level.

The UK has just reported the Unemployment Rate for March and Claimant Count Change for April. Unemployment Rate was better than expectations at 3.9%. However, the Unemployment Rate report includes data for March while the hardest hit from the lockdown was in April.

Claimant Count Change was 856,500 compared to consensus of 676,500. The report highlights the huge damage that was dealt by virus containment measures.

Yesterday, the Bank of England’s Silvana Tenreyro reiterated that the Bank was looking at all options including negative interest rates.

Negative interest rate policy in the UK will be bearish for GBP/USD as the U.S. Federal Reserve has ruled out going below zero on the interest rate front.

Also, the market may be sceptical about benefits of such policy since there are no good examples among those countries who have tried to boost growth with negative interest rates.

Technical Analysis

gbp usd may 19 2020

GBP/USD got a boost from vaccine news and is trying to return back above the key level at 1.2250. Previously, this level served as a major support level for GBP/USD, and its breach led to robust downside momentum.

Now, 1.2250 is an important resistance for the pair. If GBP/USD manages to hold above this level, it could gain additional upside momentum and head towards the 20 EMA level at 1.2300.

If the test of the 20 EMA level is successful, GBP/USD could get to the next resistance level at the 50 EMA at 1.2380.

On the support side, the nearest material support is located near 1.2080, at the low end of the recent downside move. GBP/USD may also get some support near 1.2170, which recently served as a notable support level.

The previous technical picture was bearish for GBP/USD, and it remains to be seen whether the vaccine news will provide enough support for the pair. In case GBP/USD fails to settle above 1.2250, the pair will likely return back to the downside mode.

About the Author

Vladimir is an independent trader and analyst with over 10 years of experience in the financial markets. He is a specialist in stocks, futures, Forex, indices, and commodities areas using long-term positional trading and swing trading.

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