GBP/USD Daily Forecast – British Pound Is Mostly Flat Ahead Of BoE Decision

British Pound Lacks Momentum

GBP/USD has recently tested the support level at 1.3250 while the U.S. dollar was mostly flat against a broad basket of currencies.

The U.S. Dollar Index managed to settle below 96.50 and is trying to get to the test of the support level at 96.25. A move below the support at 96.25 will open the way to the test of the support at 96 which will be bullish for GBP/USD.

Yesterday, the Fed announced that it will decrease its asset purchase program by $30 billion per month, which means that QE will be completed in March 2022. Interestingly, the Fed expects three rate hikes in 2022. It looks that the market was mostly prepared for this news, and the U.S. dollar failed to develop additional upside momentum after the initial reaction to Fed’s announcement.

Today, foreign exchange market traders will focus on BoE Interest Rate Decision. The rate is expected to stay unchanged despite recent inflation data which showed that UK Inflation Rate increased by 5.1% year-over-year in November compared to analyst consensus of 4.7%.

Traders will also take a look at flash readings of PMI reports from UK. Analysts expect that UK Manufacturing PMI declined from 58.1 in November to 57.6 in October, while UK Services PMI decreased from 58.5 to 57.

Technical Analysis

 

GBP/USD is currently trading in a range between the support at 1.3250 and the resistance at 1.3280, which is located near the 20 EMA. In case GBP/USD moves above the 20 EMA, it will head towards the next resistance level at 1.3310. A move above this level will open the way to the test of the resistance at 1.3350.

On the support side, GBP/USD needs to settle below the support at 1.3250 to have a chance to develop downside momentum in the near term. The next support level for GBP/USD is located at 1.3230.

If GBP/USD settles below 1.3230, it will head towards the support at 1.3200. A successful test of this level will push GBP/USD towards the support at 1.3170.

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