GBP/USD Forecast: Bailey bails out the bulls? Not so fast, bears are still lurking

We are committed to taking action when needed – vowed Andrew Bailey, Governor of the Bank of England, boosting the pound as more BOE bond-buying means more stimulus from the government, supporting the economy. Two members out of nine have voted to add more stimulus already now, showing the urgency.

The BOE has left rates and the £645 billion Quantitative Easing program unchanged but made a clear commitment to acting. Its "illustrative scenario" foresees the UK economy plunging by 14% in 2020, yet it stressed that this is based on many assumptions that can change. In the meantime, the BOE continues its aggressive QE program and will likely reach the limit in July. 

See BOE Quick Analysis: More QE seems only a matter of time, GBP/USD has room to rise

The next meeting is in June, and Bailey said that information about lifting the lockdown is critical to that event. Prime Minister Boris Johnson will announce the next steps in dealing with the coronavirus crisis on Sunday. While UK COVID-19 statistics are encouraging, testing and tracing capabilities are still lacking. British political analysts assess that minor easing steps will be taken – no big reopening – and that is weighing on sentiment.

In the US, President Donald Trump remains impatient with opening up the economy despite warnings of a potential second wave of infections. Outside the greater New York area, the curve is far from flattening, yet. the economic pressure is mounting.

ADP's labor figures showed a loss of over 20 million private-sector jobs, implying a horrible official Non-Farm Payrolls report on Friday. They would be able to indicate how temporary the unemployed are and how many have left the workforce. A terrible figure could boost the safe-haven dollar while a more moderate one would potentially weigh on it. In the meantime, weekly jobless claims for the week ending May 1 are eyed. 

See US Initial Jobless Claims Preview: Priced in disaster

Perhaps more importantly for markets at this point, the administration has maintained its hard line against China with Trump threatening to break away from the trade deal. Intensifying tensions have supported the greenback, but the mood improved when both sides announced a call next week.

Overall, pound/dollar traders have many events to take into consideration.

GBP/USD Technical Analysis

The Relative Strength Index on the four-hour chart has bounced above 30, thus exiting oversold conditions and allowing for more falls. On the other hand, downside momentum has eased. The currency pair is battling the 200 Simple Moving Average while trading below the 50 and 100 SMAs. 

All in all, bears are in the lead. 

Support awaits at 1.2350, which separated ranges, with more substantial support at 1.2310, the daily low. Further down, 1.2250 is strong support. 

Resistance is at 1.2385, a swing low from late April, and then 1.2420, the daily high. The next levels are 1.2455 and 1.2480.