British Pound Enjoys Significant Upside Momentum
GBP/USD continues its upside move and tests the resistance at the high end of the current trading range at 1.2650 as the U.S. dollar loses ground against a broad basket of currencies.
The U.S. Dollar Index has managed to get below the 96.5 level and is trending towards 96. The reason for the U.S. dollar weakness is the continued optimism about economic recovery.
Markets ignore the worrisome developments on the coronavirus front and focus on the improving economic activity. Yesterday, White House economic adviser Larry Kudlow stated that another country-wide shutdown was not an option since it would do more harm than good.
Today, the market optimism will be tested by the release of U.S. Initial Jobless Claims and Continuing Jobless Claims reports.
Initial Jobless Claims are expected to stay high near 1.4 million. Previously, the market has mostly ignored the worrisome Initial Jobless Claims data as it focused on signs of economic rebound.
Meanwhile, Continuing Jobless Claims are expected to decline to 18.95 million. The previous Continuing Jobless Claims report indicated that 19.29 million Americans continued to receive unemployment benefits.
At this stage, Continuing Jobless Claims is a more important metric as it indicates the number of workers who failed to find new jobs after they were laid off during the acute phase of the coronavirus crisis.
Technical Analysis
GBP/USD gained additional upside momentum and headed towards the high end of the current trading range at 1.2650. This is a significant resistance level but the current weakness of the U.S. dollar provides GBP/USD with chances to get above this level on its first attempt.
If this happens, GBP/USD will head towards the next resistance level at 1.2750. In addition, GBP/USD will have a chance to get away from the trading range between 1.2250 and 1.2650 and establish a new upside trend.
On the support side, the nearest support for GBP/USD is located at the previous resistance level at 1.2530. In case GBP/USD settles below this level, it will likely gain downside momentum and head towards the 20 EMA at 1.2490.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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