British Pound Gains Some Ground Against U.S. Dollar
GBP/USD received support at 1.4080 and is trying to settle back above 1.4100 while the U.S. dollar is flat against a broad basket of currencies.
The U.S. Dollar Index is currenty trying to settle above the nearest resistance level which is located at the 50 EMA near 90.60. This resistance level has already been tested several times and proved its strength. If the U.S. Dollar Index manages to settle above 90.60, it will gain additional upside momentum and head towards the next resistance at 90.90 which will be bearish for GBP/USD.
UK has just released inflation data for May. Inflation Rate increased by 0.6% month-over-month compared to analyst consensus which called for growth of 0.3%. On a year-over-year basis, Inflation Rate grew by 2.1% compared to analyst consensus of 1.8%. Importantly, Core Inflation Rate increased by 2% year-over-year compared to analyst consensus of 1.5%. The rapid increase of Core Inflation Rate shows that pricing pressure is increasing.
Today, foreign exchange market traders will wait for the release of Fed Interest Rate Decision and the subsequent commentary. The key question is whether Fed will react to the latest inflation news. In case Fed is less dovish than expected, U.S. dollar may get more support.
GBP/USD is currently trying to settle above 1.4100. In case this attempt is successful, GBP/USD will move towards the resistance at the 20 EMA at 1.4125.
A move above the 20 EMA will open the way to the test of the resistance at 1.4150. If GBP/USD settles above this level, it will head towards the next resistance at 1.4180.
On the support side, the nearest support level for GBP/USD is located at 1.4080. A successful test of this level will push GBP/USD towards the support at the 50 EMA at 1.4065.
If GBP/USD settles below the 50 EMA, it will move towards the support at 1.4050. In case GBP/USD gets below 1.4050, it will head towards the support at 1.4020.
For a look at all of today’s economic events, check out our economic calendar.