GBP/USD: outlook for April 3-7

GBP/USD: outlook for April 3-7

2019-11-11 • Dikemaskini

It’s official: Brexit has started! The British pound hit its 8-day low at 1.2370 on Wednesday after Prime Minister Theresa May triggered Article 50 of the Lisbon Treaty for moving out of the European Union. A tortuous process of negations with the EU on the terms of trade between Britain and the continent has begun. Towards the end of the week, GBP/USD managed to recoup its losses and surge towards 1.2550. The sterling benefited from US dollar’s weakness that came after Donald Trump said that his administration had started studying the ways to penalize the countries known for their currency manipulations.

The US efforts aimed at boosting the value of other currencies at the expense of greenback might be a major headwind for GBP/USD in the near term. Trump will meet Chinese President Xi Jinping on April 6-7 and the statements after this meeting will have a huge impact on USD.

In addition, next week, we will receive a plenty of economic releases from the both sides of Atlantic. Pay closer attention to the UK manufacturing and construction PMIs, monthly update of the Britain’s manufacturing production figures, as well as the US labor market data (NFP, average hourly earnings and unemployment rate releases are due on April 7). The EU-UK trade negotiations, upbeat US economic data and Fed’s hawkishness will make life harder for the sterling.

As GBP/USD approached resistance line from December 2016, it may feel pressure to visit lower levels. The key supports are lying at 1.2430 (50-day MA), 1.2380 (200-H4 MA) and 1.2300 on the way down to 1.2150 (support line from January lows).  On the upside, resistance is found at 1.2630/60 (200-day MA). We don’t recommend targeting higher levels on bullish positions.

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