GBP/USD Forecast: Recovery reaches critical resistance as selling the fact is a double-edged sword

• GBP/USD has been extending its recovery as markets are inspired by the US stimulus deal.
• Coronavirus-related developments are set to shape investors' mood.
• Wednesday's four-hour chart is showing that GBP/USD is nearing critical resistance. 

Prime Minister Boris Johnson will finally get parliament shut down – yet for the wrong reason. The coronavirus lockdown is reaching the House of Commons, which will take a prolonged break as part of the social distancing measures.

GBP/USD seems undeterred from strict lockdown measures imposed by the government and is recovering. The pound dropped sharply ahead of Monday's announcement – "buying the rumor" – and is now "selling the fact", recovering after the news is already out even though the economy is suffering. 

The main upside driver for cable is US dollar weakness stemming from the US Senate's announcement of a multi-trillion fiscal stimulus deal to support the economy as Covid-19 spreads. High hopes for a deal sent stocks rallying on Tuesday, with the Dow Jones Industrial Average rising by the most since 1933. However, markets may also "sell the fact" after the deal is done. If that happens, the safe-haven greenback may be in demand once again. 

Moreover, the US response to the outbreak is far from being unified. While state and local authorities expand the shuttering of the economy, President Donald Trump reiterated his desire to see the economy open by Easter, saying the cure should not be worse than the disease. In the meantime, US coronavirus cases are rising rapidly. 

Further reports about infections, deaths, and the economic toll are set to rock markets. 

UK Consumer Price Index stood came out at 1.7% in February, as expected. Investors are ignoring figures that predate the crisis and were also confused by fresher ones. Markit's preliminary Purchasing Managers' Indexes for March offset each other. While the services PMI free-fell to below 40 on both sides of the pond, manufacturing PMIs beat expectations and pointed only to a mild contraction. However, the latter figures are skewed by a sub-component that counts delivery delays as a positive sign. 

US Durable Goods Orders for February are on the Agenda later in the day, but markets are already focused on Thursday's events. The Bank of England convenes for the third time in as many weeks and may announce additional steps to support the economy. 

See BOE Preview: Does Bailey have a big bazooka? Only open-ended QE can stun sterling

In the US, weekly jobless claims are set to surge, reflecting the impact of the shutdown on unemployment. Some estimate that they could leap from just under 300,000 to around three million. 

GBP/USD Technical Analysis

Pound/dollar is battling 1.1925, which was a swing high last week and the break above it is yet to be confirmed. On the way up, the currency pair broke above the 50 Simple Moving Average on the four-hour chart and momentum has turned positive. Overall, the picture has improved for cable. 

Resistance awaits at 1.20, a round number that provided support last week. The next level to watch is 1.2120, followed by 1.2280. 

Support awaits at 1.18, which was a swing high last week, followed by 1.1710, which held it down early this week. The next line to watch is 1.1530. 

Volatility remains elevated.