HomeContributorsFundamental AnalysisGBP/USD at 5-Week High, Breaks above 1.27

GBP/USD at 5-Week High, Breaks above 1.27

Is the recovery a fast-paced “V-shape”?

The British economy has been hit hard in the wake of the Covid-19 pandemic. Just last week, the severity of the downturn was presented in stark terms by the Office for Budget Responsibility (OBR). According to the OBR, the UK economy will contract between 10.6% and 14.3% in 2020. Still, there seems to be some optimism about the economy, at least in some circles. Andy Haldane, the BoE’s chief economist, told MPs this week that the economy had recovered about half of the fall seen in March and April due to the coronavirus, and said that the economy had produced a “V-shaped bounceback”. This means that the economy was on track for a quick recovery. Is Haldane being overly optimistic? Some economists have argued that although a recovery is indeed underway, it is not “V-shaped” and the reb0und in economic activity will take time.

The UK doesn’t release any major events until late in the week, so it could well be a quiet spell for GBP/USD for the next few days. On Friday, the UK releases retail sales, which rebounded in May with a gain of 12.0%, after a plunge of 18.1% beforehand. As well, manufacturing and services PMIs are both expected to improve, with readings above the 50-level, which indicates expansion.

GBP/USD Technical

GBP/USD has climbed 1.1 percent this week, as the trend is upward. Currently, the pair is trading at 1.2708, up 0.37% on the day. GBP/USD posted slight gains in both the Asian and European sessions

  • 1.2563 is the first level of support. Below, there is support at 1.2467.
  • 1.2710 is under pressure, just above the pair. This is followed by resistance at 1.2761.
  • GBP/USD broke above the 10-day MA on Monday. This is a bullish signal and the pair has continued to move higher on Tuesday
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