Daily Market Recap - GBPUSD Forecast

The GBPUSD pair ended the week on a lower note, shedding over 1 percent at the daily close last Friday. A strengthening USD combined with lingering uncertainty on the impact of the Covid-19 pandemic in the UK has placed pressure on the pound.

The British pound has fared better than its European counterparts in recent sessions although signs of weakness did appear on Friday when the pound started registering drops against the euro and Swiss franc following days of sustained gains.

Market participants appear to have shrugged off the dismal US non-farm payroll readings on Friday as investors continue to flock to the safety of the USD. The dollar index (DXY) registered strong gains and is now floating around the 100.68 marks, further pressuring the pound. Concerns over a rapid rise in unemployment and a slowdown in business activity are pushing traders towards highly liquid assets.

The GBPUSD fell to weekly lows of 1.22 on Friday before holding slightly below the 50 percent Fibonacci retracement level at 1.23. The pair made attempts to cross over the psychological 1.25 mark this week but failed at each occasion, indicating the short-term bullish target will be to get over that hump.

On the flipside, downward pressure continues to be felt with a bearish target around the 2016 lows of 1.19. Traders should pay attention to the price action around the 1.25 mark to determine whether there is sufficient buying pressure to cross the threshold. Else, they may look into setting up short positions at that point and count on the USD maintaining its attractiveness in the short term.

(Chart Source: Tradingview 05.04.2020)

Looking ahead, as the GBPUSD is trading at historic lows, we can expect value hunters to step in and support the pair in the medium term. With massive stimulus plans from the US Federal Reserve on the way, we could expect the pound to appreciate slightly over the USD. However, markets will need to get past the virus fears and return to some degree of stability before any solid gains are to be seen.

Resistance & Support levels:

R3 1.32000

R2 1.27896

R1 1.25000

P 1.24000

S1 1.21024

S2 1.19048

S3 1.14394

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.