GBPUSD WEEKLY ANALYSIS – Potential Downside Favoured; Trend-line Put To The Test

Following the previous report on GBP/USD, price action was rejected
by the 61.8 Fibonacci level near 1.2620, breaking below also its 50.0 Fibonacci
near 1.2400. Current price action is now testing the short-term upward
trend-line, whereby a breakout below will indicate further downward potential. However,
price action might find support from the 38.2 Fibonacci near 1.2190 even after
breaking below the trend-line. 

The pair is now trading below both its 20EMA and 50EMA while MACD,
favoring bearish momentum with a potential death cross formation. The pair may
face further downside risks after a successful breakout below the current
trend-line and the 38.2 Fibonacci level. Failure to break below may suggest a
consolidation trading zone below the 61.8 Fibonacci, where a breakout above
that level would confirm a long-term bullish trend for the pair.  

From the fundamental front, global economy continues to be
threatened by the COVID-19, where countries across the world struggle to
balance their economy and the health-care of their citizens. With no effective
vaccine up-to-date, market preference is directed into safe-haven assets,
following a crash in the energy market on Monday.

On the UK front, UK Debt Management is now planning to raise £180B
through the issuance of government debt between May and July. The purpose of
the fund is to finance government spending for its battered economy due to the
COVID-19 pandemic. Furthermore, Thursday release of the manufacturing,
services, and composite purchasing managers indexes (PMI) in April all
contracted far worst than expected.

Looking ahead, market can expect updates from Brexit negotiations
between the UK and the European Union, after being cast aside due to the
outbreak of the COVID-19. The UK has only until 30 June to decide on whether or
not to extend the Brexit transition period beyond the 31 December deadline. If
the UK insists on no further extension, the country may face the risk of a
no-deal Brexit, with such limited time for negotiations.

As the whole world continues to fight against the COVID-19 pandemic,
Regain Capital wishes to remind all readers to constantly wash your hands, keep
social distancing, drink sufficient amount of water and stay safe!