GBP/USD At Risk of Sharp Decline Below 1.3000

Key Highlights

  • GBP/USD failed to clear the 1.3260 resistance and declined below 1.3150.
  • A key bullish trend line is forming with support near 1.3085 on the 4-hours chart.
  • EUR/USD remained stable above 1.1720 and corrected higher.
  • The US New Home Sales could increase 1.3% in July 2020 (MoM), less than the last 13.8%.

 

GBP/USD Technical Analysis

This past week, the British Pound failed on two occasions to clear the 1.3260 resistance against the US Dollar. As a result, there was a bearish reaction in GBP/USD below 1.3200.

Looking at the 4-hours chart, the pair broke the 1.3180 and 1.3150 support levels. The bulls lost control, resulting in a spike below the 1.3100 support level and the 100 simple moving average (red, 4-hours).

However, the pair remained well bid above the 1.3050 level. There is also a key bullish trend line forming with support near 1.3085. If the pair fails to stay above the trend line support, there is a risk of more downsides.

The main support is near the 1.3000 handle, below which the bears are likely to aim a larger decline. The next key support could be 1.2940 or 1.2905.

Conversely, the pair could start a fresh upward move above the 1.3150 resistance or the 50% Fib retracement level of the recent decline from the 1.3254 high to 1.3057 low. The main hurdle is still near the 1.3260 level.

Overall, GBP/USD must stay above 1.3000 to start a fresh increase. Looking at EUR/USD, the pair stayed above the 1.1720 support and recovered higher towards 1.1880.

Upcoming Economic Releases

  • German IFO Business Climate Index for August 2020 – Forecast 92.0, versus 90.5 previous.
  • German Gross Domestic Product for Q2 2020 (QoQ) – Forecast -10.1%, versus -10.1% previous.
  • US New Home Sales for July 2020 (MoM) – Forecast 1.3% versus 13.8% previous.