GBP/USD Forecast: Selling opportunity? Sterling set to suffer if Boris stays in hospital

• The pound is attempting recovery amid reports that PM Johnson is doing well in hospital.
• Optimism about coronavirus developments in several hotspots is weighing on the dollar. 
• Monday's four-hour chart is painting a mixed picture for the currency pair. 

"We shall meet again," said Queen Elisabeth in a rare address to the nation – and she probably also referred to Prime Minister Boris Johnson. The 55-year old leader has been admitted to a hospital in London late on Sunday in what was described as a "precautionary step."  Housing Secretary Robert Jenrick has said that Johnson is doing well, allowing the pound to recover.

Earlier, GBP/USD kicked off the week on the back foot as concerns about UK leadership in a critical time cause greater uncertainty. 

Johnson tested positive to COVID-19 in late March and continued working from self-isolation. However, the symptoms of the illness refused to abate and his doctor advised him to seek further assistance. Downing Street insisted that he remains in charge of the government, but his de-facto deputy Dominic Raab will chair Monday's cabinet meeting. Housing minister Robert Jenrick has said on Monday that he heard that Johnson is doing well.

However, there are reasons to be worried. Most of those sick with coronavirus recover within a week and overcome fever and cough. With Britain's hospitals overwhelmed by patients, it is unlikely that Johnson was sent there only for routine checks.

The longer he stays there, the higher the fears for his health and the further the pound can fall.

Foreign secretary Raab is mostly known for his support for a hard exit of the EU, quitting his position as Brexit Secretary in anger over a compromise led by then PM Theresa May. He later fell in the leadership race to inherit May and does not enjoy broad support like Johnson. Moreover, if the PM remains unable to lead the government, Raab could find himself struggling for power with other ministers and Johnson's top adviser Dominic Cummings. 

GBP/USD has been able to stabilize as a better market mood is weighing on the US dollar. Investors are encouraged by the drop in new cases and deaths in Europe. Italy and Spain – the hardest-hit countries –have both reported their best statistics in over a week with fewer deaths and confirmed cases. France, Germany and New York have also published figures that all amount to "light at the end of the tunnel." 

If new COVID-19 cases, deaths, and Intensive Care Unit utilization all fall, the world would gradually return to normal, allowing the economies to reopen. Global coronavirus cases are nearing 1.3 million and 70,000 mortalities. 

The new optimism replaces pessimism after America's Non-Farm Payrolls report on Friday. The world's largest economy lost 701,000 jobs – worse than expected – and reflecting the situation in mid-March, before the latest layoffs. The quick determination in the world's largest economy is drawing funds toward the safe-haven dollar. 

Later in the day, health updates from the UK, Spain, Italy, and the US will all be of interest. Yet for the pound, any update on Boris Johnson remains central. Without a report that the PM has returned to Downing Street, sterling may suffer. 

GBP/USD Technical Analysis

Pound/dollar is suffering from downside momentum but is trading above the 100 Simple Moving Average, battling the 50 SMA, and trading below the 200 SMA. The relative Strength Index is balanced. 

All in all, bears enjoy a marginal lead.

Support awaits at 1.2210, the daily low. It is followed by 1.2140, a low point in late March, followed only by 1.20 – a psychologically significant level.

Resistance is at 1.2320, the daily high and a support line from last week. It if followed by 1.2490, a stubborn cap in late March and early April. 1.2610 is next.

Despite a limited range in recent days, volatility may explode later on.