GBP/USD Forecast: Break below 1.2400 will set the stage for further weakness

• GBP/USD witnessed a turnaround on Wednesday amid a strong pickup in the USD demand.
• Fresh coronavirus jitters, fears of transatlantic trade war underpinned the safe-haven USD.

The GBP/USD pair failed to capitalize on its early uptick to weekly tops, instead met with some fresh supply near the 1.2540-50 region amid a strong pickup in the US dollar demand. Worries about the ever-increasing number of new coronavirus cases overshadowed the optimism over a sharp V-shaped global economic recovery. This, in turn, triggered a fresh wave of risk-aversion trade and forced investors to take refuge in the safe-haven greenback.

The British Pound was further pressured by reports that the US is considering tariffs on $3.1 billion of exports from the United Kingdom, France, Spain and Germany. Meanwhile, the already weaker risk sentiment deteriorated further after the International Monetary Fund (IMF) projected a deeper recession in 2020 and a slower recovery in 2021. The IMF now expects the global output to contract by 4.9% in 2020 – 1.9% below -3% April forecast – and grow by 5.4% in 2021.

The pair dived nearly 130 pips intraday, reversing the previous day's positive move and snapping two consecutive days of winning streak. The pair now seems to have entered a bearish consolidation phase and held steady above the 1.2400 round-figure mark through the Asian session on Thursday. In the absence of any major market-moving economic releases from the UK, the USD price dynamics might continue to act as an exclusive driver of the pair's momentum on Thursday.

Later during the early North American session, a slew of important US macro data will be looked upon for some meaningful trading opportunities. Thursday's US economic docket highlights the release of Initial Weekly Jobless Claims and Durable Goods Orders. This, along with the final Q1 GDP report and Good Trade Balance figures might trigger some volatility.

Short-term technical outlook

From a technical perspective, the pair stalled this week’s goodish recovery move near a resistance marked by the 38.2% Fibonacci level of the 102076-1.2813 positive move. The mentioned hurdle coincides with a one-month-old ascending trend-line support breakpoint and should now act as a key pivotal point for short-term traders. Above the mentioned hurdle, the pair is likely to surpass the 1.2600 mark and test 23.6% Fibo. level near the 1.2645 region.

On the flip side, some follow-through weakness below the 1.2400 mark might turn the pair vulnerable to slide back towards weekly lows, around the 1.2335 area. The latter nears 61.8% Fibo. level, which if broken should pave additional weakness towards the 1.2300 mark. The downward trajectory could further get extended towards the 1.2200 level en-route the next major support near the 1.2165-60 horizontal zone.