GBP/USD Rallies to Resistance as the Dollar Pares Gains

The markets show positive sentiment to start the new week out as the equity markets are rallying while gold prices have eased lower. The dollar is seen declining against all of its major counterparts.

GBP/USD has advanced half a percent in the early day but faces the same resistance that held it lower in late March.

UK Prime Minister Johnson is expected to announce plans on how they expect to come out of a lockdown, possibly as soon as this week.

Johnson emphasized the importance of remaining patient and of avoiding a potential second spike of infections.

Investors this week will look to central banks and GDP data in assessing what kind of toll the virus is having on the economy. The first reading of Q1 GDP in the US will be released on Wednesday and analysts believe growth may have declined by as much as an annualized 3.9% in the first quarter.

The Federal Reserve will conclude it’s three-day meeting and hold a press conference later on Wednesday. The Fed is expected to stand pat after already implementing several easing measures to help combat the economic impacts of the virus.

Technical Analysis

GBP/USD is facing resistance at 1.2144 which is a level that held the pair lower in late March and higher earlier this month.

In addition to the horizontal level, the pair is also facing the upper bound of a rising trend channel. The current area of resistance could trigger a turn lower with a first target of 1.2376 to the downside.

GBP/USD has been trading sideways for a month at this point and it remains to be seen if this week’s Fed meeting and GDP data will trigger a range break.

The US Dollar index turned lower late last week after testings resistance from prior April highs. The decline does not suggest a trend change and the bias for the greenback remains to the upside.

Bottom Line

• GBP/USD has advanced to a confluence of resistance at 1.2439.
• Volatility is expected later in the week as the US releases GDP figures and the Federal Reserve is scheduled to hold a press conference.