GBP/USD Update 13/05/2020
2 Hour Chart – GBPUSD 13/05/2020 14:00 pm

Essential Insights

  • GBP/USD fell towards the monthly supported as suggested in the previous report (11th May, 2020).
  • UK and EU Brexit tension weight on Sterling strength.
  • Boris Johnson’s speech on getting businesses moving has drawn confusion from many.
  • Quarterly GDP data indicates economy is upholding well against expectations.

Technical Analysis:

Our previous analysis on GBP/USD (11th May 2020), suggested continued bearish momentum towards the key monthly support at 1.22900, with potential entries being at the retest of the intraday broken support at 1.23600.

Prices followed this forecast almost exactly, if you traded the analysis, GBP/USD fell 100 points after rejecting from the intraday support.

GBP/USD Decision Point?
45 Minute Chart – GBPUSD 13/05/2020 14:00pm

Currently, prices have rejected from the monthly support level at 1.23600 however remains trapped in a short-term bearish channel down structure, illustrated above.

Prices are testing the upper trendline resistance of the channel, a break above is likely to see a push towards the previously broken intraday support at 1.22900 and the 200-day EMA at 1.23570. A rejection is likely to see prices falling back down to test the key monthly support at 1.23600. Currently rejection from the upper trendline resistance suggests a leg lower, however the monthly support could provide some short-term relief and see price push slightly higher.

Trade Idea:

GBP/USD Bearish Trade Idea
30 Minute Timeframe – GBPUSD 13/05/2020 14:00pm

If GBP/USD is able to closure bearish, below the upper trendline resistance of the channel, on the 30-minute timeframe. There is a good probability that prices can fall back down to the monthly support, with stops being above the previously broken intraday support at 1.22900. It is recommended to place stops at entry after a position is at least 10 pips in profit.

Fundamentals:

Boris Johnson’s call to get businesses back to work should have provided some much-needed relief, this was far from the case.

A lack of a detailed approach has left businesses asking how they can do it. There are a number of flaws to sending workers back to businesses, for example ensuring that workers keep two meters apart at all times.

As a result of this lack of clarify, U. K’s main trade group (Scotland) have undermined and consequently decided to ignore Boris Johnson’s call for businesses to resume. Richard Burge, Chief executive of the London Chamber of Commerce and Industry also said ‘Without more information on how to keep staff safe, it would be foolish for any business leader to encourage non-essential staff to return’.

Q1 GDP data was reported to be 2% against analysts estimates of 2.5%. Whilst this is the largest quarterly decline since the 2008 crisis, the reading has still beaten forecasts. This news could suggest the UK economy is slightly more resilient than expected, though any short gains are likely to be short winded.

Q2 data is likely to be much worse, with lockdown measures being active for the entire month of April. To supplement this, the British Retail Consortium (BRC) said that retail spending has dropped enormously within the month of April by a unprecedented 19.1%. Barclays also said that credit and debit spending has dropped 36.5% within the same timeframe.

It is likely GBP/USD will remain under pressure overall until Boris Johnson answers businesses concerns and with seemingly imminent negative data to come.