GBP/USD stalls below 1.2400, opens prospects for a classic Fib retracement

  • GBP/USD struggles to gain access to the 1.24 area. 
  • Brexit and COVID-19 are critical themes mid-week, British Prime Minister Boris Johnson has announced a "Rooseveltian New Deal".
  • Bears seeking a test below the 38.2% Fib where lies the 61.8% and confluence of the prior highs. 

Despite the news that the UK is set to reimpose Leicester under lockdown following a breakout of COVID-19, cable has managed to rally to a high of 1.2395 and move into the Wall Street close and early Asia higher by 0.8%.

GBP/USD is embarking on a test of key supply territory which limits the potential of much ground being made in the 1.24 level for the time being. 

Bears could be inclined to be setting their targets to the downside at this juncture, especially considering the ramifications of a second wave of COVID-19 in the UK as well as fresh rounds of Brexit talks.

Brexit talks will be face-to-face this time around which means the heat will be especially high around these negotiations while there are still little signs of a long-awaited breakthrough.

A "Rooseveltian New Deal"

Prime Minister Boris Johnson, drawing on US President Franklin D. Roosevelt's New Deal program of the 1930s, has pledged to take a 'scythe through red tape' to get projects built and create thousands of jobs.

British Prime Minister Boris Johnson has announced a "Rooseveltian New Deal" to relaunch the country's economy with a massive government spending program.

Eager to get the country beyond the pandemic and the growing public anger over his government's handling of the outbreak, he spared little rhetorical flourish in outlining plans to spend more than £5-billion ($8.4-billion) to build schools, homes, hospitals, roads and rail link today.

"It sounds like a New Deal," he said, "and all I can say is that, if so, then that is how it is meant to sound and to be because that is what the times demand."

"It's the right time to borrow," he said. "We face a real crisis and we have to deal with it. But we're going to deal with it in the most energetic possible way."

US second wave could cripple the USD

Meanwhile, Federal Reserve Chairman Powell and Treasury Secretary Mnuchin spoke about how to recover the economy at a House Financial Services Committee hearing.

A second outbreak of the coronavirus could force governments and people to withdraw from the economic activity, Jerome Powell, Chairman of the Federal Reserve System, said.

"The path of the economy is highly uncertain," Powell added while testifying.

The question everyone is now asking is whether investors will start to identify the second wave as a problem unique to the US.

A sell-off on Wall Street has, to date, supported the dollar, however, if the COVID-19  problem is indeed unique to the US, it will perhaps mean that the greenback will not receive the typical boost on bad US news? 

GBP/USD technical outlook

From a technical perspective, above 1.2417 and prior resistance, the pair will likely rise further towards 1.2450s. However, it could be a slow grind at this juncture to the downside and long term play from a retracement of the day's rally. 

A pullback to a 38.2% Fibonacci in the 1.2340s could be a healthier outcome for the bulls targeting higher prospects.

Below the 38.2% lies the 61.8% and confluence of the prior highs. 




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.

Feed news

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Forex News

Latest Forex News

Editors’ Picks

EUR/USD bounces after upbeat COVID-19 cure news

EUR/USD is trading above 1.13, rebounding from the lows. Gilead reported that its drug Remdesevir substantially reduces mortality among COVID-19 patients. The news boosted stocks and weighed on the dollar. US coronavirus statistics are due out.


GBP/USD recaptures 1.26 as the market mood improves

GBP/USD is trading above 1.26 as the market mood improves and the safe-haven dollar retreats. Investors are shrugging off Brexit concerns and focusing on hopes to cure coronavirus. US COVID-19 statistics are due out.


XAU/USD consolidates daily gains above $1,800

After advancing to its highest level since September of 2011 at $1,818 on Wednesday, the XAU/USD pair staged a correction and briefly dropped below $1,800 on Thursday.

Gold News

Cryptocurrencies: War for dominance hit the bedrock of the market

Bitcoin tried to regain market share and activated sales in the Altcoin segment. BTC/USD, ETH/USD and XRP/USD are looking for supports and a rebound to push them to new elative highs. The current compression on the XRP/USD chart could trigger an exploding movement.

Read more

WTI drops to fresh weekly lows below $39 amid virus risks, IEA forecast

WTI (August futures on Nymex) extends the steep declines seen on Thursday to drops over 1.50% in the European session this Friday. The oil bears breach the 39 level to hit the lowest levels in eight days at 38.76.

Oil News