GBP/USD Forecast: Outlook remains negative amid coronavirus-led crisis and despite massive stimulus

The GBP/USD pair continued with its good two-way price swings on Thursday and finally ended the day in the red for the third consecutive session – also marking its seventh day of a negative close in the previous eight. Following the previous day's brutal selloff of nearly 700 pips to the lowest level since 1985, the pair witnessed some intraday short-covering move and climbed back to the 1.1800 neighbourhood. However, the uptick lacked any strong follow-through, rather met with some aggressive supply amid a sustained US dollar buying interest.

Worries over the economic fallout from the coronavirus pandemic, leading to a global recession, continued boosting the greenback's status as the global reserve currency and was seen as one of the key factors that prompted some fresh selling at higher levels. The intraday slide picked up some additional pace and dragged the pair back closer to the overnight swing low after the Bank of England (BoE) slashed interest rates to 0.1%. The UK central bank also announced to increase its holdings of the UK government and corporate bonds by £200 billion, taking the total level of QE to £645 billion.

The BoE move comes as a part of a coordinated effort by major central banks to calm investors' nerves and ease worries about tightening liquidity conditions. This eventually led to a modest recovery in the global risk sentiment and prompted some USD profit-taking, helping the pair to gain some positive traction during the Asian session on Friday. The pair has now moved back to mid-1.1600s and in absence of any major market-moving economic releases, either from the UK or the US, remains at the mercy of the broader market risk sentiment and the USD price dynamics.

Short-term technical outlook

Given this week’s break below a short-term descending trend-channel, the near-term set-up still seems tilted in favour of bearish traders and supports prospects for an extension of the recent bearish trend. Hence, the attempted recovery might be solely attributed to some short-covering move, amid extremely oversold conditions, which runs the risk of fizzling out rather quickly. Hence, any subsequent recovery might still be seen as a selling opportunity and remain capped.

In the meantime, the overnight swing high, around the 1.1700 round-figure mark, now seems to act as immediate resistance. Some follow-through buying has the potential to assist the pair to aim back towards reclaiming the 1.1800 level. The momentum could further get extended but seems more likely to confront stiff resistance near the top end of the mentioned trend-channel, currently near the 1.1835-40 region.

On the flip side, immediate support is pegged near the 1.1600 mark, below which bears are likely to aim back towards challenging the key 1.1500 psychological mark. Failure to defend the mentioned support levels will reinforce the bearish outlook and pave the way for a further near-term depreciating move for the major.