GBP/USD Daily Forecast – British Pound Tries To Rebound

GBP/USD is in a rebound mode following the steep fall of the last week which was driven by mass flight to safety and the resulting strength of the U.S. dollar.

Over the weekend, the U.S. tried to pass a new coronavirus aid package but political differences between Democrats and Republicans prevented the bill from being signed.

The world is eagerly awaiting for the ultimate content of the U.S. coronavirus aid package, which could include measures worth more than $1 trillion. There’s increased urgency for these measures since nearly one third of Americans have received orders to stay at home on Sunday.

Investors and traders will be able to evaluate the initial economic impact of virus containment measures this week, as the U.S will report important economic data.

Manufacturing PMI and New Home Sales are due to be reported on Tuesday, March 24, followed by Durable Goods Orders on March 25 and Initial Jobless Claims on March 26.

The Initial Jobless Claims number is of special interest since it will show the scope of layoffs due to coronavirus-related measures. The previous data showed that Initial Jobless Claims were 281,000, while the consensus for this week’s number is 775,000. I’d note that some analysts expect that the Initial Jobless Claims number will easily surpass 1 million.

Meanwhile, the Bank of England is set to make its interest rate decision on Thursday, March 26. Previously, the Bank of England cut the interest rate from 0.75% to 0.25% and then to 0.1% in a series of emergency meetings. No further cut is expected at Thursday meeting, but the Bank will reveal its evaluation of the current situation, which is very important for GBP/USD.

Technical Analysis

GBP/USD has left the deeply oversold territory and continues its attempts to rebound. The next important resistance level is in the 1.1800 area. In previous trading sessions, the pair made two attempts to stay above 1.18000 but faced material selling pressure. If GBP/USD manages to hold above this level, the pair may get to the 1.1900 – 1.2000 area

On the support side, GBP/USD attracted increased buyer interest near 1.1500. I’d note that the U.S. Dollar Index has once again tried to breach the 104 level but failed. Continued U.S. dollar failure to maintain momentum upside against a broad basket of currencies may provide further support for GBP/USD.