GBP/USD hits one-week lows, nears 1.2400

• GBP/USD biased to the downside, breaches previous one-week lows at 1.2437.
• Risk aversion and an expected COVID-19 lockdown extension are hurting the pound.
• The US dollar appreciates as investors look for safety in times of uncertainty.

The sterling is heading south on Thursday, extending its reversal from Tuesday’s peak at 1.2647 to explore prices below 1.2437 support level, for the first time in a week. The negative market sentiment, which is pushing investors towards safe assets, plus the expected extension of the COVID-19 lockdown in the UK are weighing heavily on the cable, that lost about 1.7% over the last two days.

GBP/USD hit by risk aversion and fears of COVID-19 outcome

The pound is losing ground on Thursday, especially against safe-haven currencies, such as the US dollar and the Japanese yen, with the market awaiting the British Government to announce an extension of the COVID-19 lockdown. According to the experts, the UK might turn out to be one of the worst-hit countries by the Coronavirus pandemic and some voices anticipate that the UK economy could shrink as much as 13% this year.

In this scenario, the US dollar appreciates against its main peers, in spite of the bleak macroeconomic figures seen in the US over the last days. The economic uncertainty is pushing investors towards the dollar, considered a safe asset due to its status as the world’s reserve currency.

GBP/USD attacks support area at 1.2437

Regarding technical levels, the pair is pushing against April 15 low at 1.2437, a relevant support area, because it is the lower limit of the last week’s trading range and previous resistance level on early April. If this level is breached, the pair might seek support at 1.2360 (Apr 9 low) before 1.2287 (Apr 8 low). On the upside, today intraday resistance lies at 1.2513, a level that has capped the pair twice so far, and above here, April 15 high at 1.2575 and April 14 high at 1.2645.

GBP/USD key levels to watch