GBP/USD benefits from coronavirus calm and other reasons that can propel it higher

February 12, 2020 Off By admin-445
  • GBP/USD has been on the rise as coronavirus fears recede everywhere.
  • Powell’s testimony and Brexit headlines are set to move the pound. 
  • Wednesday’s four-hour chart is showing an improving picture for the bulls.

Has the coronavirus outbreak peaked? For those suffering or exposed to the respiratory disease – from Wuhan to Brighton – the scare is far from over. However, the top influencers on GBP/USD are providing some calm.

Mark Carney, Governor of the , has compared coronavirus’ economic damage to previous ones and sounded calm. Apart from the potential bounce that would follow the economic damage, Carney also hailed the resilience of the UK’s financial system. His words contributed to keeping  bid.

On the other side of the pond, Jerome Powell, Chairman of the Federal Reserve, said that the bank is closely monitoring the potential spillovers from China. However, he also sounded calm about the strength of the economy, adding that there is no reason to see the expansion ending soon. The calmer mood is somewhat weighing on the safe-haven dollar.

The third factor behind cable’s advance comes from UK  figures for the fourth quarter. The British economy stagnated on a quarterly basis but yearly growth exceeded estimates with 1.1%. Overall, investors are shrugging pre-election figures and focusing on a “Boris boost” – a rise in business confidence after Prime Minister Boris Johnson was returned to office.

Sterling’s Achilles Heel remains Brexit, but it seems that markets have become immune to heightened rhetoric ahead of official talks. The EU and the UK kick off negotiations in early March and have toughened their positions. Michel Barnier, Chief EU Negotiator, has said that Britain is “kidding itself” if it thinks that the EU will allow it to stray away from the bloc’s rules while maintaining equivalence. Despite the posturing, both sides may compromise behind closed doors – and that is what investors are expecting now.

Powell continues testifying today and he may move markets, in addition to coronavirus headlines and Brexit speculation.

GBP/USD Technical Analysis

Momentum on pound/dollar’s four-hour chart has turned positive and the pair is edging closer to the 50 Simple Moving Average. GBP/USD continues advancing after breaking above the steep downtrend resistance line that accompanied it earlier in the month.

While it is not out of the woods, the technical picture is improving.

Resistance awaits at 1.30, the round number which also capped cable last week. Next, 1.3060 was a  line beforehand and also converges with the 200 Simple Moving Average. 1.3110 held it down in late January and 1.3175 follows.

Below the battle line of 1.2975, support awaits at 1.2940, which was a swing low in early February. It is followed by 1.2895, a low point on Tuesday, and by the 2020 low of 1.2875.