GBP/USD Forecast: Not out of the woods yet amid coronavirus jitters, Brexit uncertainties

• GBP/USD lacked any firm directional bias and remained confined in a range on Thursday.
• Coronavirus jitters, along with the prevalent risk-off mood benefitted the safe-haven USD.
• Brexit uncertainties further held the GBP bulls from placing any bets and capped the upside.

The GBP/USD pair seesawed between tepid gains/minor losses through the early European session and consolidated its recent fall to two-month lows. Investors remain worried that the second wave of coronavirus infections could lead to the return of severe lockdown restrictions and derail the global economic recovery. This, in turn, continued driving some haven flows towards the US dollar. However, warnings by various Fed officials, stressing the need for more fiscal stimulus to sustain the recovery, kept a lid on any strong gains for the USD and helped limit any deeper losses for the major.

On the other hand, the British pound was trying to find its footing amid persistent Brexit-related uncertainties. It is worth reporting that the EU's chief Brexit negotiator, Michel Barnier in London for informal talks until Friday. Investors now seemed reluctant and preferred to wait for fresh Brexit updates before placing any aggressive bets. This, in turn, led to the pair's subdued/range-bound price action through the first half of the trading action on Thursday. Nevertheless, increasing odd of a messy Brexit at the end of the transition period should keep a lid on any strong gains for the pair.

Market participants now look forward to the US economic docket, highlighting the release of Initial Weekly Jobless Claims and New Home Sales data. This, along with a scheduled testimony by the Fed Chair Jerome Powell and Treasury Secretary Steven Mnuchin, will influence the USD price dynamics and provide some trading impetus. In the meantime, the broader market risk sentiment and developments surrounding the coronavirus saga might assist traders to grab some short-term trading opportunities.

Technical outlook

From a technical perspective, the pair’s inability to register any meaningful recovery from a technically significant moving average suggests that the near-term bearish bias might still be far from being over. Hence, any attempted recovery move might still be seen as a selling opportunity and remain capped near the 1.2800 mark. That said, some follow-through buying might prompt some short-covering move and push the pair further beyond the 1.2855-60 region, towards the 1.2900 mark.

On the flip side, bearish traders might still need to wait for sustained weakness below the 38.2% Fibonacci level of the 1.1412-1.3482 positive move, around the 1.2685-75 region, before positioning for any further decline. The pair might then accelerate the fall to the 1.2625-20 horizontal support en-route the 1.2600 mark. The downward trajectory could further get extended towards mid-1.2500s before the pair eventually drops to the key 1.2500 psychological mark.