GBP/USD Likely To Bounce Back While US Oil Prices Turn Negative
- GBP/USD started a downside correction from the 1.2647 monthly high.
- A major bullish trend line was breached with support at 1.2565 on the 4-hours chart.
- The UK Claimant Count is likely to change 172.5K in March 2020, up from 17.3K.
- The price of US oil has turned negative for the first time in history.
GBP/USD Technical Analysis
This past week, the British Pound extended its rise above 1.2600 against the US Dollar. However, GBP/USD struggled to surpass 1.2650 and started a downside correction.
Looking at the 4-hours chart, the pair traded as high as 1.2647 before correcting lower. It traded below the 23.6% Fib retracement level of the last major upward move from the 1.2164 low to 1.2647 high.
Moreover, there was a break below a major bullish trend line with support at 1.2565. It opened the doors for more losses and the pair approached the 1.2400 support and the 100 simple moving average (red, 4-hours).
The 50% Fib retracement level of the last major upward move from the 1.2164 low to 1.2647 high is also near the 1.2400 region. The next key support area is near the 1.2350 level and the 200 simple moving average (green, 4-hours).
Any further losses could start an extended decline towards the 1.2200 support area. On the upside, an initial resistance is near the 1.2500 level. A successful close above 1.2500 and a follow through above 1.2520 might set the pace for a fresh increase towards 1.2600 or even 1.2650.
Fundamentally, the Chicago Fed National Activity Index (CFNAI) for March 2020 was released by Federal Reserve Bank of Chicago. The market was looking for a minor decline in the index from the last reading of 0.16.
The actual result was lower than the forecast, as the Chicago Fed National Activity Index (CFNAI) decline to -4.19. Besides, the last reading was revised down from 0.16 to 0.06.
The report added:
All four broad categories of indicators used to construct the index made negative contributions in March, and three of the four categories decreased from February.
Overall, GBP/USD is likely to bounce back as long as it is above 1.2320. If not, it might dive towards 1.2200. Looking at EUR/USD, the pair is facing many hurdles near 1.0930 and 1.0950.
More importantly, the price of US oil has turned negative for the first time in history. The price on the futures contract for West Texas crude (due to expire soon) dived below $0 and traded in into negative territory (below -$37.00 a barrel).
Upcoming Economic Releases
- UK Claimant Count Change March 2020 – Forecast 172.5K, versus 17.3K previous.
- UK ILO Unemployment Rate Feb 2020 (3M) – Forecast 3.9%, versus 3.9% previous.
- German ZEW Economic Sentiment for April 2020 – Forecast -42.3, versus -49.5 previous.