Canada markets closed

GBP/USD Daily Forecast – British Pound Remains Under Pressure

Vladimir Zernov

GBP/USD Video 30.06.20.

Key Support At 1.2250 In Sight

GBP/USD continues to trend down as the U.S. dollar gains ground against a broad basket of currencies while the British pound is under pressure due to fears about increased public spending in the UK.

The U.S. Dollar Index continues its attempts to settle above the key resistance level at 97.5. The situation with coronavirus continues to get worse, and some U.S. states have already decided to close bars and paused with reopening of movie theaters and indoor dining.

Fears about the implementation of additional virus containment measures provide support to safe haven assets like the U.S. dollar.

On the other hand, the economic data continues to deliver positive suprises. Yesterday, the U.S. Pending Home Sales report showed that Pending Home Sales increased by as much as 44.3% month-over-month in May.

The UK has just reported the final reading of the first-quarter GDP Growth Rate. The report was worse than expected as GDP declined by 2.2% quarter-over-quarter compared to analyst consensus which called for a decline of 2%. Second-quarter GDP Growth Rate will be much worse.

Meanwhile, UK Prime Minister Boris Johnson wants to revive economy with an infrastructure plan but markets question Britain’s ability to pay for this investment. The prospect of more money-printing puts additional pressure on the British pound.

Technical Analysis

GBP/USD continues to trend down in a local downside channel and is testing the low end of the current trading range at 1.2250. This is a very important moment for GBP/USD as a move below the support at 1.2250 will provide a chance to establish a new downside trend and move away from 1.2250 – 1.2650 range.

In this scenario, GBP/USD will develop additional downside momentum and head towards the next support level at 1.2170. I’d note that the 20 EMA has just crossed the 50 EMA to the downside, suggesting the continuation of the current downside trend.

On the upside, the nearest resistance level is located at 1.2350. A move above this resistance level will likely lead to increased upside momentum and take GBP/USD closer to the next resistance level at the 20 EMA at 1.2430.

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

This article was originally posted on FX Empire

More From FXEMPIRE: