GBP/USD Daily Forecast – U.S. Dollar Tries To Gain Ground After Major Rebound Of The British Pound

Donald Trump Extends Existing Stay-At-Home Measures Until April

The U.S. dollar is gaining some ground against the British pound following the major upside move of the previous days.

The main news on the fundamental front comes from the U.S. which has accumulated more than 143,000 coronavirus cases according to data from Johns Hopkins University.

The U.S. President Donald Trump has extended the current stay-at-home orders until the end of April, which is a major turn compared to his previous intentions to reopen the economy by Easter.

Meanwhile, the UK Prime Minister Boris Johnson has stated that the situation with the virus would get worse before it gets better. Some of the lockdown measures which are currently in place could last months, putting additional pressure on the UK economy.

As I wrote on Friday, weekends are challenging periods for the markets since negative virus data accumulates, and traders come to their desks on Monday to see bad news.

However, it remains to be seen whether the extended virus containment measures will provide enough support for the U.S. dollar as the safe haven asset of last resort.

Now that the measures have been extended for the month, market participants may decide that the government will start lifting virus containment measures in May. Less uncertainty is typically bullish for riskier assets and bearish for the U.S. dollar.

Technical Analysis

As I wrote on Friday, the 50 EMA near the 1.2530 level was the ultimate goal of the current rebound of GBP/USD. This goal has almost been reached, and now the pair will likely need stronger catalysts to get above the 50 EMA.

On the support side, the 20 EMA near the 1.2250 level is the nearest major level. Traders should note that the upside move was so fast that there are material gaps between support and resistance levels, which will likely lead to increased volatility in GBP/USD in the near term.

An upside breakout of the 50 EMA level could take GBP/USD to the next resistance level at 1.2750. The downside breakout of the 20 EMA level will eliminate the near-term upside momentum in the pair, and GBP/USD will head towards the 1.2000 level.

This article was originally posted on FX Empire

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