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GBP/USD: Here’s Why 1.2500 Holds Key For More Upsides

Aayush Jindal

Aayush Jindal

Key Highlights

  • GBP/USD is facing a strong resistance near the 1.2500 region.
  • Recently, there was a break below a contracting triangle with support near 1.2380 on the 4-hours chart.
  • EUR/USD remains at a risk of more downsides below 1.0750.
  • The UK Construction PMI declined from 52.6 to 39.3 in March 2020.

GBP/USD Technical Analysis

In the past few days, the British Pound recovered nicely above 1.2000 against the US Dollar. GBP/USD broke the key 1.2200 resistance area to move into a positive zone.

Looking at the 4-hours chart, the pair broke many hurdles near 1.2305 and settled above the 100 simple moving average (red, 4-hours). Besides, there was a break above the 50% Fib retracement level of the main decline from the 1.3200 high to 1.1409 low.

However, the pair struggled to climb further above the 1.2500 resistance area and the 200 simple moving average (green, 4-hours). It seems like the 61.8% Fib retracement level of the main decline from the 1.3200 high to 1.1409 low is acting as a strong barrier for the bulls.

Therefore, a successful break above the 1.2500 resistance zone is must for more upsides. If not, the pair could start a fresh decline below the 1.2100 support area.

Recently, there was a break below a contracting triangle with support near 1.2380 on the same chart. It has opened the doors for more downsides, but the 1.2100 support is very important.

A successful break below the 1.2100 support and the 100 SMA may perhaps push GBP/USD below 1.2000 and 1.1980.

Fundamentally, the UK Construction PMI was released by the Chartered Institute of Purchasing & Supply and Markit Economics. The market was looking for a decline from 52.6 to 44.0.

The actual result was very disappointing as the UK Construction PMI fell sharply from 52.6 to 39.3 in March 2020. Besides, business expectations slump to weakest since October 2008.

The report added:

March data pointed to the fastest downturn in UK construction output for almost eleven years as emergency public health measures to halt the spread of coronavirus 2019 (COVID-19) led to stoppages of work on site and a slump in new orders.

Overall, GBP/USD must climb higher above 1.2500 to continue higher. If not, it is likely to resume its slide below 1.2100 and 1.2000.

Upcoming Economic Releases

  • Germany’s Industrial Production for Feb 2020 (MoM) - Forecast -0.9%, versus +3.0% previous.
  • UK Halifax House Price Index for March 2020 (MoM) - Forecast +0.1%, versus +0.3% previous.