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GBP/USD Recovers Following Friday’s Range Break

By:
Jignesh Davda
Updated: Apr 6, 2020, 10:55 UTC

After trading in a range for much of last week, the GBP/USD eventually broke lower on Friday and is seen testing the breakout point in early trading on Monday.

GBP/USD Recovers Following Friday’s Range Break

In this article:

The British pound held up well most of last week against a stronger dollar but eventually pushed lower on Friday despite data that showed the US jobs market had been impacted more than expected by the Coronavirus.

The monthly loss of jobs in the US of 701 thousand was much larger than the analyst estimate for a decline of 100 thousand. Further, the unemployment rate rose to 4.4% which is the highest since September 2017.

Earlier today, the purchasing manager’s index for construction in the UK was reported to decline at the sharpest rate in more than a decade.

Poor data is expected to continue as reporting agencies will start releasing data that covers March which is when the Coronavirus threat began to accelerate.

Of particular importance this week will be the weekly US jobless claims report. Last week, the report revealed more than six million people reporting claims which is more than 30 times the otherwise recent average.

In the UK, Prime Minister Boris Johnson was admitted to the hospital yesterday. Johnson said he was still showing mild symptoms and that his in house doctors recommended he undertake routine tests at the hospital. Johnson still leads the government and is expected to return shortly.

Technical Analysis

GBPUSD 4-Hour Chart

GBP/USD shows a clear bearish break lower after trading in a range for most of last week.

Sterling bears should be mindful of the fact that the pair showed strength last week as the US dollar had gained with momentum against its major counterparts for most of the week.

Range resistance for the pair is found at 1.2308 and where the pair closes on a 4-hour chart in relation to the level will be important going into the US session.

If sellers are able to defend the breakout point of the prior range, the pair stands to decline further with the next main level of interest at 1.1925.

On the other hand, a break above 1.2308 would invalidate the bearish view and suggests that the pair is still in the uptrend that began in the second half of March. An immediate target for such a scenario comes in near recent highs at 1.2480

Bottom Line

  • GBP/USD is retesting the breakout point from a range that dominated most of last week.
  • UK construction PMI figures fell to an 11-year low today as Coronavirus continues to harm the economy.

About the Author

Jignesh has 8 years of expirience in the markets, he provides his analysis as well as trade suggestions to money managers and often consults banks and veteran traders on his view of the market.

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