- GBP/USD has been extending its recovery as markets are inspired by the US stimulus deal.
- Coronavirus-related developments are set to shape investors' mood.
- Wednesday's four-hour chart is showing that GBP/USD is nearing critical resistance.
Prime Minister Boris Johnson will finally get parliament shut down – yet for the wrong reason. The coronavirus lockdown is reaching the House of Commons, which will take a prolonged break as part of the social distancing measures.
GBP/USD seems undeterred from strict lockdown measures imposed by the government and is recovering. The pound dropped sharply ahead of Monday's announcement – "buying the rumor" – and is now "selling the fact", recovering after the news is already out even though the economy is suffering.
The main upside driver for cable is US dollar weakness stemming from the US Senate's announcement of a multi-trillion fiscal stimulus deal to support the economy as Covid-19 spreads. High hopes for a deal sent stocks rallying on Tuesday, with the Dow Jones Industrial Average rising by the most since 1933. However, markets may also "sell the fact" after the deal is done. If that happens, the safe-haven greenback may be in demand once again.
Moreover, the US response to the outbreak is far from being unified. While state and local authorities expand the shuttering of the economy, President Donald Trump reiterated his desire to see the economy open by Easter, saying the cure should not be worse than the disease. In the meantime, US coronavirus cases are rising rapidly.
Further reports about infections, deaths, and the economic toll are set to rock markets.
UK Consumer Price Index stood came out at 1.7% in February, as expected. Investors are ignoring figures that predate the crisis and were also confused by fresher ones. Markit's preliminary Purchasing Managers' Indexes for March offset each other. While the services PMI free-fell to below 40 on both sides of the pond, manufacturing PMIs beat expectations and pointed only to a mild contraction. However, the latter figures are skewed by a sub-component that counts delivery delays as a positive sign.
US Durable Goods Orders for February are on the Agenda later in the day, but markets are already focused on Thursday's events. The Bank of England convenes for the third time in as many weeks and may announce additional steps to support the economy.
See BOE Preview: Does Bailey have a big bazooka? Only open-ended QE can stun sterling
In the US, weekly jobless claims are set to surge, reflecting the impact of the shutdown on unemployment. Some estimate that they could leap from just under 300,000 to around three million.
GBP/USD Technical Analysis
-637207265527942088.png)
Pound/dollar is battling 1.1925, which was a swing high last week and the break above it is yet to be confirmed. On the way up, the currency pair broke above the 50 Simple Moving Average on the four-hour chart and momentum has turned positive. Overall, the picture has improved for cable.
Resistance awaits at 1.20, a round number that provided support last week. The next level to watch is 1.2120, followed by 1.2280.
Support awaits at 1.18, which was a swing high last week, followed by 1.1710, which held it down early this week. The next line to watch is 1.1530.
Volatility remains elevated.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
AUD/USD holds steadily as traders anticipate Australian Retail Sales, Fed’s decision
The Aussie Dollar registered solid gains against the US Dollar on Monday, edged up by 0.55% on an improvement in risk appetite, while the Greenback was crushed by Japanese authorities' intervention. As Tuesday’s Asian session begins, the AUD/USD trades at 0.6564.
EUR/USD finds support near 1.0720 after slow grind on Monday
EUR/USD jostled on Monday, settling near 1.0720 after churning in a tight but lopsided range as markets settled in for the wait US Fed outing. Investors broadly expect US rates to hold steady this week, but traders will look for an uptick in Fed guidance for when rate cuts could be coming.
Gold prices soften as traders gear up for Fed monetary policy decision
Gold price snaps two days of gains, yet it remains within familiar levels, with traders bracing for the US Fed's monetary policy decision on May 1. The XAU/USD retreats below the daily open and trades at $2,334, down 0.11%, courtesy of an improvement in risk appetite.
Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Relief wave on altcoins likely as BTC shows a $5,000 range
Bitcoin price has recorded lower highs over the past seven days, with a similar outlook witnessed among altcoins. Meanwhile, while altcoins display a rather disturbing outlook amid a broader market bleed, there could be some relief soon as fundamentals show.
Gearing up for a busy week: It typically doesn’t get any bigger than this
Attention this week is fixated on the Federal Reserve's policy announcement scheduled for Wednesday. While the US central bank is widely expected to remain on hold, traders will be eager to discern any signals from the Fed regarding the possibility of future interest-rate cuts.