GBP/USD Forecast: Three reasons for the crash, uptrend support lost and there may be more ANALYSIS | Published Apr 15, 2020 08:45 (+00:00)

  • GBP/USD has been falling from the highs as the scale of coronavirus deaths is becoming starker. 
  • The British government is set to extend the lockdown amid criticism.
  • Wednesday’s four-hour chart is pointing to further falls.

Sterling is stumbling – and for good reasons. While broad dollar strength alongside a retreat in stocks is also behind the slide in GBP/USD, there are three significant UK-related reasons for the fall.

1) Coronavirus cases

What is the real scale of the disease’s death toll? A leap in UK mortalities – from all causes – implies that there are far more COVID-19 deaths than the ones confirmed. Deaths at care homes have been rising and fatalities in other places may also be lacking confirmation. The new statistics and estimation weigh on the pound.

According to Johns Hopinks’ tracker, the UK has nearly 95,000 cases and over 12,000 deaths from coronavirus. 

The government is trying to ramp up testing for the disease, but the goal of 100,000 probes per day seems elusive. Without having the ability to test, it will also be hard to ease restrictions.

2) Lifting the lockdown?

The British government is set to decide on extending the lockdown tomorrow. The dates that have been thrown into the air are May 3 and May 7 – and these may be extended later on. Apart from uncertainty related to testing, the lack of leadership is also an adverse factor.

Prime Minister Boris Johnson continues recovering in Chequers and Foreign Secretay Dominic Raab – who is deputizing for the PM – lacks the political clout. Ministers are clashing behind the scenes with some desiring a longer shuttering of the economy and others wanting to open it up. Keir Starmer, the leader of the opposition, has demanded a plan. 

3) Economic damage 

The Office for Budget Responsibility (OBR) published a scenario in which the economy shrinks by 35% in the second quarter and then rebounds. For the whole of 2020, the institution foresees a drop of 13% in Gross Domestic Product

It also provided outlooks for a ballooning government deficit amid the economic damage and the fiscal boosts. Nevertheless, small businesses seem to be struggling with getting funds from the government. 

Apart from these UK-related events, US retail sales for March are of high interest. The world’s largest economy has likely suffered a hit to consumption in the month when “stay at home” orders began. 

See Retail Sales Preview: Can consumers stare down unemployment?

Later in the day, the Federal Reserve releases its Beige Book, which consists of economic reports from the Fed’s various regions and also serves as a hint toward the upcoming decision in two weeks.

See  Beige Book Preview: Back to the future

Overall, the action is set to continue and the picture is becoming darker.

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Yohay Elam Yohay Elam
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GBP/USD Forecast: Three reasons for the crash, uptrend support lost and there may be more

ANALYSIS | Published Apr 15, 2020 08:45 (+00:00)


  • GBP/USD has been falling from the highs as the scale of coronavirus deaths is becoming starker. 
  • The British government is set to extend the lockdown amid criticism.
  • Wednesday’s four-hour chart is pointing to further falls.

Sterling is stumbling – and for good reasons. While broad dollar strength alongside a retreat in stocks is also behind the slide in GBP/USD, there are three significant UK-related reasons for the fall.

1) Coronavirus cases

What is the real scale of the disease’s death toll? A leap in UK mortalities – from all causes – implies that there are far more COVID-19 deaths than the ones confirmed. Deaths at care homes have been rising and fatalities in other places may also be lacking confirmation. The new statistics and estimation weigh on the pound.

According to Johns Hopinks’ tracker, the UK has nearly 95,000 cases and over 12,000 deaths from coronavirus. 

The government is trying to ramp up testing for the disease, but the goal of 100,000 probes per day seems elusive. Without having the ability to test, it will also be hard to ease restrictions.

2) Lifting the lockdown?

The British government is set to decide on extending the lockdown tomorrow. The dates that have been thrown into the air are May 3 and May 7 – and these may be extended later on. Apart from uncertainty related to testing, the lack of leadership is also an adverse factor.

Prime Minister Boris Johnson continues recovering in Chequers and Foreign Secretay Dominic Raab – who is deputizing for the PM – lacks the political clout. Ministers are clashing behind the scenes with some desiring a longer shuttering of the economy and others wanting to open it up. Keir Starmer, the leader of the opposition, has demanded a plan. 

3) Economic damage 

The Office for Budget Responsibility (OBR) published a scenario in which the economy shrinks by 35% in the second quarter and then rebounds. For the whole of 2020, the institution foresees a drop of 13% in Gross Domestic Product

It also provided outlooks for a ballooning government deficit amid the economic damage and the fiscal boosts. Nevertheless, small businesses seem to be struggling with getting funds from the government. 

Apart from these UK-related events, US retail sales for March are of high interest. The world’s largest economy has likely suffered a hit to consumption in the month when “stay at home” orders began. 

See Retail Sales Preview: Can consumers stare down unemployment?

Later in the day, the Federal Reserve releases its Beige Book, which consists of economic reports from the Fed’s various regions and also serves as a hint toward the upcoming decision in two weeks.

See  Beige Book Preview: Back to the future

Overall, the action is set to continue and the picture is becoming darker. 

GBP/USD Technical Analysis

Pound/dollar has fallen below the uptrend support line that accompanied it since hitting a low of 1.2165 last week. Upside momentum on the four-hour chart has waned. On the other hand, cable continues trading above the 50, 100, and 200 Simple Moving Averages. 

Significant support awaits at 1.2490, which was a stubborn cap in late March. It is followed by 1.2385, a resistance line from last week and also where the 200 SMA hits the price. Next, we find 1.2280 and 1.2165.

Resistance is at 1.2580, which was a temporary stop on the way up, and by Tuesday’s peak of 1.2645. The next line to watch are 1.2720.

Source from https://www.fxstreet.com/analysis/gbp-usd-forecast-three-reasons-for-the-crash-uptrend-support-lost-and-there-may-be-more-202004150845

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