GBP/USD Forecast: Pound still out of the market’s favour

GBP/USD Current Price: 1.1720

• UK PM Johnson finally called for a country’s lockdown, enforced social distancing.
• UK manufacturing sectors affected by the coronavirus outbreak, services output suffered the most.
• GBP/USD holding above 1.1700, but potential gains still seen limited.

The GBP/USD pair surged to 1.1799, backed by easing demand for the American currency, but also by UK PM Johnson’s announcements late Monday. After refusing to apply tough measures, Boris Johnson finally announced a series of tougher measures against COVID-19, enforcing social distancing through a 3-week lockdown, and the close of all non-essential shops.

UK data was mixed, as the CBI Industrial Trends Survey showed that manufacturing output expectations fell to their weakest since the financial crisis over a decade ago,  printing at -29% in March following a -18% in February The preliminary estimate of the March Markit Manufacturing PMI printed 48, better than the 45 expected, while the Services PMI came in at 35.7, down from 53.2. In both cases, the contraction was attributed to the coronavirus crisis. The UK will release this Wednesday, February inflation figures, with have little chances of triggering relevant market movements.

GBP/USD short-term technical outlook

The GBP/USD pair has stalled its advance well below the previous weekly high, and despite dollar’s weakness, it remains at risk of falling further. The 4-hour chart shows that it stands above a now flat 20 SMA, while the larger moving averages maintain their bearish slopes well above the current level. Technical indicators in the mentioned chart remain below their midlines, so far offering a neutral stance. The risk of a bearish extension would increase on a break below 1.1690.

Support levels: 1.1690 1.1650 1.1605

Resistance levels: 1.1740 1.1790 1.1830

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