GBP/USD Daily Forecast – Back Under 1.3400

GBP/USD Video 02.09.20.

U.S. Dollar Rebounds After Strong Manufacturing PMI Data

GBP/USD declined below 1.3400 as the U.S. dollar continued its rebound against a broad basket of currencies.

Yesterday, strong U.S. Manufacturing PMI data provided material support to the U.S. dollar. Markit Manufacturing PMI increased from 50.9 in July to 53.1 in August while ISM Manufacturing PMI grew from 54.2 to 56.

These reports were good enough to cause a material rebound of the U.S. dollar. The U.S. Dollar Index, which has recently tested yearly lows at 91.75, rebounded closer to 92.50.

In case the U.S. Dollar Index manages to settle above 92.50, it will likely gain more upside momentum and head towards the next resistance at the 20 EMA at 93. This scenario will be bearish for GBP/USD.

UK also provided positive Manufacturing PMI data. The country’s Manufacturing PMI increased from 53.3 in July to 55.2 in August.

It looks like the short trade in the U.S. dollar got too crowded so the positive data from U.S. led to profit taking. However, it remains to be seen whether the current rebound will continue as the fundamental pressure on the U.S. dollar will likely persist.

Traders expect that the Fed will keep interest rates at the bottom for years, which does not bode well for the long-term prospects of the American currency.

Technical Analysis

GBP/USD pulled back after the major upside move and is trying to settle below 1.3400.

The nearest resistance level for GBP/USD is located at 1.3425. In case GBP/USD manages to get above this resistance level, it will gain more upside momentum and head towards the next resistance at the recent highs at 1.3485.

RSI is still far from the extremely overbought territory so there is plenty of room to gain more upside momentum in case the U.S. dollar continues its decline against a broad basket of currencies.

On the support side, the nearest support level is located at 1.3270. The previous upside move was fast an no material levels were formed between 1.3270 and 1.3425.

In case GBP/USD manages to settle below 1.3270, it will head towards the next support level at the 20 EMA at 1.3210.

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