GBP/USD Forecast: Trapped in a triangle and depressing UK coronavirus figures point down

“We have no idea if we can manage the peak” – the words of Dr. Alison Pittard, the dean of the faculty of intensive care medicine, is only one of many worrying reports related to the UK’s handling of coronavirus. A hospital in London nearly ran out of oxygen over the weekend, and the broad statistics are also of worry.

GBP/USD has been trading in a narrower range after several weeks of extreme volatility, and the next move may be to the downside given the worsening situation.

The UK’s death toll has surged by 31% to 2,352, and the total number of cases nears 30,000. Prime Minister Boris Johnson has been coming under increased criticism as the National Health Service is struggling. Britain has been late to announce a lockdown, and the growing human toll is also having an economic impact, as welfare claims surge.

Paul Cosford of Public Health England has said that he expects infections to rise in the next two-three weeks before plateauing. However, models are partially based on China’s experience, and numbers reported by Beijing are coming under higher scrutiny and skepticism. Overall, there is a broad consensus that things may get worse before they get better.

The situation is far from improving in the US, which has over 200,000 infections and more than 4,000 mortalities. Florida has joined most US states in announcing “shelter in place” orders with Texas remaining the sole large state holdout.

Wednesday’s economic statistics have not captured the full extent of the financial hardship. ADP’s private-sector jobs report showed modest loss of 27,000 jobs – yet this is due to the cut-off date, March 12. Weekly jobless claims are more up to speed with events, and they are forecast to show an increase from 3.283 million – already an all-time record – to 3.5 million. Goldman Sachs foresees a leap to 5.25 million.

See Initial Jobless Claims Preview: The tidal wave rolls on

Apart from the all-important labor figure from the US, coronavirus headlines and the broader market mood are set to move GBP/USD. The relative calm is allowing the pound to recover as the safe-haven dollar is seeing diminishing demand. However, investors may return to their gloom, sending stocks lower and the greenback to fresh gains.

GBP/USD Technical Analysis

Pound/dollar is trading within a narrowing triangle or wedge. According to technical analysis textbooks, this squeeze will eventually result in the currency pair picking a direction and moving sharply. Where will cable go?

Momentum on the four-hour chart has turned negative, but GBP/USD is trading above the 50 and 100 Simple Moving Averages, albeit below the 200 SMA.

All in all, the picture is mixed.

Support awaits at 1.2330, which provided support on Wednesday. It is followed by 1.2250, a swing low from earlier this week, and then by 1.2140, a support line from last week.

Resistance awaits at 1.2430, the daily high, followed by 1.2485, Friday’s high point. Next, 1.2610 and 1.2730 are the next levels to watch.