GBP/USD Video 14.07.20.
Demand For Safe Haven Assets Increases As California Reimposes Virus Containment Measures
GBP/USD failed to settle above the high end of the current trading range at 1.2650 and declined closer to the 20 EMA at 1.2520 as the U.S. dollar gained ground against a broad basket of currencies after California reimposed some virus containment measures.
California’s Governor Gavin Newsom decided to close bars, restaurants, museums, movie theatres as the number of new coronavirus cases surged. In the hardest-hit counties, churches, hair salons and gyms will also have to close. In addition, children will not return to schools in August in Los Angeles and San Diego.
This is a major setback for the whole U.S. economy as California is the state with the biggest GDP in the country. Not surprisingly, demand for safe haven assets increased after California introduced new restrictions.
The U.S. Dollar Index, which has previously been trying to get to the test of the 96 level, has returned back above 96.5.
U.S – China tensions also play a role in the recent increase in demand for safe haven assets as the U.S. stated that China did not have the rights for most of the disputed offshore resources in South China Sea.
The UK has just released Industrial Production and Manufacturing Production reports for May. Industrial Production increased by 6% month-over-month while Manufacturing Production grew by 8.4% as the British economy started to reopen.
On a year-over-year basis, Industrial Production declined by 20% while Manufacturing Production decreased by 22.8%. June reports should look better as the economy continued its rebound after the acute phase of the crisis.
GBP/USD failed to gain upside momentum and continued to trade in the range between the major support level at 1.2250 and the major resistance level at 1.2650.
GBP/USD made several attempts to settle above 1.2650 but these attempts were unsuccessful. GBP/USD will need significant upside catalysts to get above 1.2650 and head towards the next resistance level at 1.2750.
On the support side, the nearest support for GBP/USD is located near the 20 EMA at 1.2520. A move below this level will push GBP/USD towards the next support level at the 50 EMA at 1.2480.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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