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

GBP/USD Video 04.06.20.

British Pound Pulls Back After Major Upside Move

GBP/USD is pulling back from recent highs after it failed to settle above 1.2600.

The U.S. dollar is finally rebounding against a broad basket of currencies, and the U.S. Dollar Index has settled closer to 97.5 after touching a low of 97.19.

The U.S. dollar has been under pressure for many days as global markets focused on the recovery. Assets like stocks or riskier currencies rallied while demand for safe haven assets decreased.

This trend was reinforced by better-than-expected PMI data in both the U.S. and UK.

U.S. Services PMI increased from 26.7 in April to 37.5 in May while U.S. Composite PMI grew from 27.0 to 37.0.

UK Services PMI increased from 13.4 in April to 29.0 in May, and UK Composite PMI grew from 13.8 to 30.0.

UK had a tougher lockdown than the U.S. so it’s not surprising that UK PMI numbers are worse. At the same time, reports from both U.S. and UK show that economies are starting to rebound after the acute phase of the coronavirus crisis.

Today, the market will focus on employment reports from the U.S. The Initial Jobless Claims report is expected to show that 1.8 million Americans filed for unemployment benefits in a week, down from 2.1 million in the previous report.

Continuing Jobless Claims are expected to decline from 21 million to 20 million.

Positive surprises on the job front may provide additional support for riskier assets and put more pressure on the U.S. dollar.

Technical Analysis

GBP/USD did not manage to settle above 1.2600 and is losing ground after the significant upside move. The nearest support for GBP/USD is located at 1.2500.

In case GBP/USD moves below 1.2500, it will head towards the next support level at the 50 EMA at 1.2380.

I’d note that the 20 EMA is about to cross the 50 EMA to the upside, suggesting the continuation of the upside trend.

On the upside, GBP/USD will have to deal with the major resistance at 1.2650. If GBP/USD gets above this resistance level, it will gain upside momentum and head towards the next resistance level at 1.2750.

From a big picture point of view, GBP/USD is in a range between 1.2250 and 1.2650. GBP/USD will likely require significant catalysts to move out of this range.

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