GBP/USD Daily Forecast – Test Of Resistance At 1.3540

GBP/USD Video 17.12.20.

British Pound Continues To Move Higher Against U.S. Dollar

GBP/USD is currently trying to settle above the resistance at 1.3540 while the U.S. dollar continues to lose ground against a broad basket of currencies.

The U.S. Dollar Index is testing the psychologically important support level at 90. While yesterday’s Fed comments were not as dovish as some traders expected, the American currency remains under pressure on the foreign exchange market. If the U.S. Dollar Index settles below the 90 level, it will gain additional downside momentum which will be bullish for GBP/USD.

UK and EU moved closer to the Brexit deal which provided significant support to the British pound. Today, traders will focus on the Bank of England Interest Rate Decision. Most likely, the Bank of England will not make any major moves as Brexit negotiations are still ongoing.

Yesterday, UK reported that Inflation Rate decreased by 0.1% month-over-month in November while analysts expected that it would grow by 0.1%. On a year-over-year basis, Inflation Rate grew by 0.3%. Meanwhile, Core Inflation Rate also decreased by 0.1% month-over-month. It is already clear that the second wave of lockdowns put material pressure on prices.

Flash PMI reports for December indicated that UK Manufacturing PMI increased from 55.6 in November to 57.3 in December while Services PMI grew from 47.6 to 49.9. Numbers below 50 show contraction.

Technical Analysis

gbp usd december 17 2020

GBP/USD is testing the nearest resistance level at 1.3540. In case GBP/USD manages to settle above this level, it will move towards the next resistance at 1.3610.

A move above the resistance at 1.3610 will open the way to the test of the next resistance at 1.3655. I’d note that GBP/USD did not visit this territory for several years so it remains to be seen whether previous levels will be relevant in today’s trading.

On the support side, a move below 1.3540 will push GBP/USD towards the support at 1.3500. In case GBP/USD declines below 1.3500, it will head towards the next support at 1.3485. A successful test of this level will open the way to the next support at 1.3440.

For a look at all of today’s economic events, check out our economic calendar.