GBP/USD Daily Forecast – U.S. Dollar Tries To Find Support

GBP/USD Video 07.07.20.

Risk Appetite In Spotlight Amid Worsening Coronavirus Situation And Increasing U.S. – China Tensions

GBP/USD continues to trade near 1.2500 as the U.S. dollar is mostly flat against a broad basket of currencies after yesterday’s sell-off.

Yesterday, global market optimism boosted riskier assets, but better-than-expected U.S. Services PMI and Composite PMI reports provided some support to the U.S. dollar and stopped the decline of the U.S. Dollar Index.

Services PMI increased from 37.5 in May to 47.9 in June while analysts expected that it will grow to 46.7. Composite PMI also grew to 47.9. While numbers below 50 show contraction, PMI reports indicated that the economy is rebounding faster than expected.

In the UK, New Car Sales report highlighted that car sales were down 34.9% year-over-year in June. This was a major improvement from the May report which showed that New Car Sales were down 89% year-over-year due to the lockdown. Meanwhile, Construction PMI increased from 28.9 in May to 55.3 in June, indicating a very fast rebound of construction activity.

Today, the market will likely focus on evaluating risks from the continued spread of coronavirus and another round of tensions between U.S. and China.

In California, coronavirus-related hospitalizations have jumped by 50% over the last two weeks while Miami had to close restaurant dining due to the spread of the disease. So far, the markets have mostly ignored the worsening situation on the coronavirus front which was bearish for the U.S. dollar.

On the U.S. – China front, U.S. Secretary of State Mike Pompeo indicated that U.S. may ban social media apps from China, including TikTok.

Technical Analysis

The technical picture for GBP/USD did not change much in recent trading sessions. GBP/USD continues to trade near 1.2500 and tries to get above the nearest resistance level at 1.2530.

If this happens, GBP/USD will get additional upside momentum and head towards the high end of the current range at 1.2650. As GBP/USD spent several trading sessions just below the resistance at 1.2530, a move towards 1.2650 may be quick.

On the support side, the nearest support is still located at the 50 EMA at 1.2450. A move below this level will signal a return of the local downside trend.

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