GBP/USD Daily Forecast – British Pound Rebounds After Sell-Off
U.S. Dollar Pulls Back
GBP/USD is currently trying to settle back above 1.3835 while the U.S. dollar is losing some ground against a broad basket of currencies.
The U.S. Dollar Index failed to settle above the resistance at 92.80 and pulled back towards 92.70. RSI is in the moderate territory, so there is plenty of room to gain additional upside momentum in case the right catalysts emerge. If the U.S. Dollar Index gets above the resistance at 92.80, it will head towards the next resistance level at 93.10 which will be bearish for GBP/USD.
Yesterday, U.S. reported that Inflation Rate increased by 5.4% year-over-year in June while Core Inflation Rate grew by 4.5%. Both reports exceeded analyst expectations.
Today, UK reported that Inflation Rate grew by 0.5% month-over-month in June compared to analyst consensus which called for growth of just 0.2%. On a year-over-year basis, Inflation Rate increased by 2.5%. Core Inflation Rate grew by 2.3% year-over-year compared to analyst consensus of 2%.
Prices are moving faster than expected, and central banks will have to adjust their policies sooner than previously estimated. If Fed signals that it is ready to talk about reducing its asset purchase program, U.S. dollar may get additional support.
Technical Analysis
GBP/USD failed to settle below the support at 1.3800 and rebounded towards the resistance at 1.3835. In case GBP/USD manages to settle above this level, it will move towards the next resistance at 1.3865.
A successful test of this level will push GBP/USD towards the 20 EMA at 1.3875. In case GBP/USD gets above the 20 EMA, it will move towards the next resistance level at 1.3900.
On the support side, the nearest support level for GBP/USD is located at 1.3800. If GBP/USD declines below 1.3800, it will move towards the support at 1.3780.
A move below the support at 1.3780 will open the way to the test of the support at 1.3745. In case GBP/USD manages to settle below this level, it will head towards the next support at 1.3710.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
