GBP/USD Forecast: Boris' careless care home comment, weak stimulus, downtrend resistance, all point down
|- GBP/USD is under pressure as global markets curb their enthusiasm.
- The UK government's lackluster green stimulus and PM Johnson's latest comments are weighing on the pound.
- Tuesday's four-hour chart is showing that cable is capped under downtrend resistance.
"Too many care homes didn’t really follow the procedures in the way that they could have" – these comments by Prime Minister Boris Johnson about old age residencies have caused anger and further eroded the British government's political credit as the country is attempting recovery from coronavirus.
The embattled PM – who personally suffered badly from COVID-19 – may be preparing for a potential inquiry. Some 20,000 people have died at care homes and the UK has the highest mortality rate in Europe.
Chancellor of the Exchequer Rishi Sunak will meet lawmakers later on Tuesday and may provide more details ahead of unveiling the government's stimulus plan on Wednesday. However, the media has already reported that the government is set to allocate £3 billion to the green investment package – falling short of similar pledges from other large European countries. If the rest of the package is underwhelming, sterling could continue suffering.
Both comparisons to the continent – in coronavirus and green investment – are unflattering and come amid the deadlocked Brexit talks. Negotiators continue talking in the background and the lack of any statements may be evidence that progress is being made. However, past experience has shown that radio silence early in the week eventually ended in acrimonious statements on Friday.
Broader markets are on the back foot on Tuesday, reversing some of Monday's gains. Stcoks surged amid China's encouraging of a bull market, falling US coronavirus cases, and an upbeat ISM Non-Manufacturing Purchasing Managers' Index figure.
These three factors are now working in reverse – Beijing is calling for "rational" behavior, pouring cold water on its previous call for buying. America's COVID-19 cases may have been depressed due to the weekend effect and may see a bump up now. Finally, data may worsen with Tuesday's JOLTs job openings report, set to show a decrease in hiring in May. While the statistic is lagging, the fact that the Federal Reserve is watching it makes it important.
There have been no new significant opinion polls ahead of November's presidential race, leaving challenger Joe Biden nine points ahead of incumbent President Donald Trump. Markets have yet to tune into the news.
More If the US presidential election were today? But it's not.
Overall, pound/dollar has room to fall.
GBP/USD Technical Analysis
Cable is capped under a moderate downtrend resistance line set by lower highs. Momentum on the four-hour chart has turned to the downside but the currency pair is still holding above the 50, 100, and 200 Simple Moving Averages on the four-hour chart.
Support awaits at 1.2440, a low point early in the month, followed by 1.24, a stubborn cap from last week. Next, 1.2340 and 1.23 are eyed.
Resistance is at 1.2525, Monday's high, followed by 1.2550, the late June peak. The next cap is at 1.2615.
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