• Wall Street extends rally, Dow Jones up by more than 5%. 
  • DXY down 1.40%, boost GBP/USD to one-week highs above 1.2100.

The GBP/USD rose above 1.2000 at the beginning of the American session and recently reached a fresh one-week high at 1.2160. It is trading near the top, almost seven hundred pips above the weekly low. 

The ongoing recovery in Cable faces the next resistance at 1.2200/20 while the 1.1970/80 area has become a key short-term support. Technical indicators in the four hours chart are approaching overbought levels but the momentum remains solid with no signs of correction. 

It’s all about the greenback 

The decline of the US dollar is the critical driver of the GBP/USD rally. The DXY is down 1.40% on Thursday and it dropped back below 100.00, to 99.54, the lowest in a week. In Wall Street, the Dow Jones gains 5.30% and the Nasdaq 3.80%. The improvement in risk sentiment weakened the US dollar. 

Earlier on Thursday, Fed’s Powell said the central bank will not run out of ammunition. Later, initial jobless claims data showed the largest rise to record high levels: 3.283 million, almost five times the previous historic highs. 

The Fed is now on an open-ended QE program and the US Senate approved an economic package of $2 trillion, to mitigate the impact of the coronavirus. Those events help risk sentiment. Still volatility is at extreme levels and markets look unstable. 

Technical levels