GBP/USD Daily Forecast – U.S. Dollar Supported By Demand For Safe Haven Assets

GBP/USD Video 19.06.20.

UK Retail Sales Report Shows Strong Recovery In May

GBP/USD settled below the 50 EMA at 1.2465 as demand for safe haven assets increased amid fears of the second wave of coronavirus and poor U.S. employment data.

U.S. Initial Jobless Claims report showed that 1.5 million Americans filed for unemployment benefits in a week. Analysts expected that Initial Jobless Claims will decline to 1.3 million.

Continuing Jobless Claims report was also disappointing as Continuing Jobless Claims stayed above the psychologically important 20 million level at 20.5 million.

The disappointing reports provided support to the U.S. dollar as traders increased their purchases of safe haven assets, and the U.S. Dollar Index tested the 97.5 level.

The Bank of England has left its interest rate unchanged at 0.1% and increased its quantitative easing program from 645 billion pounds to 745 billion pounds. These moves were widely expected.

The UK has just released data on Retail Sales for May. Retail Sales increased by 12% month-over-month compared to analyst consensus which called for an increase of 5.7%. In the previous month, Retail Sales declined by 18%.

On a year-over-year basis, Retail Sales declined by 13.1% while analysts anticipated a drop of 17.1%.

Excluding Fuel, Retail Sales were up 10.2% month-over-month and down 9.8% year-over-year.

The data shows that the retail sector has started to recover after the acute phase of the coronavirus crisis. Delayed demand led to a rapid increase in Retail Sales in May.

In my opinion, the most interesting data will be provided in July – August when the initial demand is satisfied and consumers show what the “new normal” looks like.

Technical Analysis

GBP/USD declined below the 50 EMA at 1.2465 and continued the downside trend. Currently, GBP/USD tries to rebound, and the 50 EMA serves as the first material resistance level.

In case GBP/USD gets above this level, it will likely head towards the next resistance at the 20 EMA at 1.2520.

On the support side, GBP/USD has recently received support above 1.2400. If GBP/USD manages to settle below this level, it will head towards the next support level at 1.2350.

From a big picture point of view, GBP/USD continues to go down in a local downside channel while it stays in the wide trading range between 1.2250 and 1.2650.

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