Oil plunge sees switch to risk off theme; US Dollar strengthens as GBPUSD breaks lower (GBPUSD forecast)

Intermediate
  • A more significant shift to a “risk off” theme over the past 24 hours with the major equity indices (stock averages) pushing through important supports, in reaction to ongoing concerns regarding the functioning of the Oil futures market.
  • As we noted in yesterday’s article, the May Light Crude Oil future plunged down to negative $40 (yes, negative) on Monday, with traders not wanting to take physical delivery of oil.
  • This has now impacted too on futures months further out in time, showing the fragility of the oil price and oil market.
  • In the Forex space, this “risk off” theme has seen broader US Dollar strength, with the US currency rallying against most currencies (although sideways against both the Euro and Yen).
  • Here we take a look at US Dollar strength in the guise of GBPUSD weakness.

GBPUSD day trade outlook: Intermediate-term shift from bullish to neutral; risks stay lower

A Tuesday plunge below various supports, but notably through key 12287 for an intermediate-term shift from bullish to neutral, to reinforce the push lower through 1.2408/1.2399 supports after the mid-April reversal of the up trend line from early April, to keep the threat lower into Wednesday.

  • We see a downside bias for 1.2247 and 1.2217; a break below aims for key 1.2163 and maybe 1.2125.
  • But above 1.2356 targets 1.2421, which we would look to try to cap. Above aims for 1.2492.

GBPUSD intermediate-term outlook

The latter April selloff below 1.2287 saw an intermediate-term shift from bullish to a broader range we see as 1.2163 to 1.2647.

  • Downside risks: Below 1.2163 sets an intermediate-term bear trend for 1.1639 and maybe 1.1410.
  • Upside risks: Above 1.2647 sets an intermediate-term bull trend for 1.3200 and maybe 1.3515.

4 Hour GBPUSD Chart

GBPUSD Chart 2020-04-22

Editor in chief

Steve Miley has 29 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Market Chartist, the Editor-in...continued

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