GBP/USD Forecast: Oversold conditions to the rescue? Everything else points down

King dollar has been clinging to its throne but not all its subjects are equal – the pound has been the loser among top currencies, with GBP/USD dipping below 1.23. The reasons for the currency pair's fall will likely continue pushing it lower. 

Starting from broader markets, the collapse in oil prices continues to weigh on equities and boosts the safe-haven greenback. Brent crude oil has joined WTI in tumbling down, with the European benchmark trading under $20, the lowest since 1999. The American benchmark is trading around $10 after a sell-off sent the WTI May contract deep into negative territory on Monday.

Technical quirks related to contract rollovers and Exchange Traded Funds have exacerbated the falls, but they do not change the big picture – coronavirus lockdowns have crushed demand. Oil prices reflect the crude economic reality of considerable carnage to the global economy. 

Moving to the UK, coronavirus deaths have jumped above 800 after one day of solace on Monday, showing that it is too early to lift the lockdown. Andrew Bailey, Governor of the Bank of England, said that removing restrictions too early and reapplying them may deal an even greater blow to the economy. 

The government has been heavily criticized for handling the crisis, from the procurement of Personal Protective Equipment (PPE) to obtaining ventilators and other topics. While Prime Minister Boris Johnson has been recovering from the disease, his absence from the public sphere adds to the sense of having the situation under little control.

The mood in the UK is weighing on the pound while it has been ignoring economic figures. Consumer Price Index decelerated to 1.5% in March, within expectations, and showing stability despite the crisis. Jobless claims rose by only 12,200 last month, better than expected. However, the figure may be missing Britain's lockdown that came late in the month.

Brexit talks continue and may produce headlines that may move the pound. However, negotiations have been quiet and may stay so until the end of the week. Chief EU Negotiator Michel Barnier is scheduled to hold a press conference on Friday. 

UK and US COVID-19 statistics are of interest later on. While New York seems to have flattened and also bent the curve, cases in New Jersey are worrying. Frictions between the White House and state governors over testing – needed to ease the shelter-in-place orders – and other steps are prevalent. 

American lawmakers agreed on a new $484 billion fiscal package focused mostly on helping businesses. 

GBP/USD Technical Analysis

The Relative Strength Index on the four-hour chart is nearing the 30 level – getting closer to oversold conditions and thus implying a bounce. Cable dropped below the 200 Simple Moving Average in its recent fall, completing the loss of the 50, 100, and 200 SMAs. Momentum remains to the downside. 

Support awaits at the fresh low of 1.2250. It is followed by the April low of 1.2160, and then by 1.1980. 

Resistance is at 1.2335, the daily high, followed by 1.2410, which supported it in mid-April and it is also where the 100 SMA meets the price. The next levels at 1.2525 and 1.2645.