GBP/USD Forecast: 1.2165 seems to be the next relevant objective for bears ahead of 1.2100
Resurgent USD demand prompted some fresh selling around GBP/USD on Wednesday.
Powell rejected the idea of negative rates and provided a strong lift to the greenback.
Concerns about the second wave of the coronavirus infections also benefitted the USD.
The GBP/USD pair staged a goodish intraday bounce on Wednesday, albeit struggled to capitalize on the move and retreated around 130 pips from daily tops. The British pound gained some traction following the release of less weak UK macro data, showing the UK economy contracted by 2.0% during the first quarter of 2020 as compared to consensus estimates of 2.5%. This coupled with some renewed US dollar selling pressure during the European trading session provided an additional boost and lifted the pair to an intraday high level of 1.2339.
Meanwhile, the Fed Chair Jerome Powell, in a highly anticipated speech on Wednesday, rejected the idea of negative interest rates and provided a much-needed respite to the USD bulls, which, in turn, prompted some fresh selling around the major. Powell also said that the economic path ahead was highly uncertain and subject to significant downside risks. The greenback further benefitted from reviving safe-haven demand amid fears about the second wave of coronavirus infections and fading hopes for a quick global economic recovery.
The pair finally settled near the lower end of its daily trading range and remained depressed for the fourth consecutive session on Thursday. The pair slipped below the 1.2200 mark, hitting five-week lows during the Asian session, as market participants now look forward to the BoE Governor Andrew Bailey’s comments for a fresh impetus. Later during the early North American session, the release of the US Initial Weekly Jobless Claims will influence the USD price dynamics and produce some meaningful trading opportunities.
Short-term technical outlook
From a technical perspective, the pair now seems to have confirmed a decisive breakthrough the neckline support of a bearish double-top pattern on the daily chart. Hence, the ongoing slide seems more likely to get extended towards April monthly swing lows, around the 1.2165 region, before the pair eventually slides further towards the 1.2100 round-figure mark.
On the flip side, any meaningful recover attempt beyond the 1.2200 mark is likely to confront a stiff resistance near the 1.2260-65 supply zone. That said, a sustained strength above the mentioned barrier might prompt some short-covering move and lift the pair back towards the 1.2300 mark. Some follow-through buying might negate the bearish bias and should pave the way for a further near-term recovery move, possibly back towards the 1.2400-1.2420 supply zone.
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