GBP/USD Daily Forecast – British Pound Moves Higher After UK Inflation Reports

U.S. Dollar Is Under Pressure Against British Pound

GBP/USD is currently trying to settle back above the resistance at 1.3835 while the U.S. dollar is losing ground against a broad basket of currencies.

Yesterday, the U.S. Dollar Index made an attempt to settle below the 50 EMA at 92.45 but failed to develop sufficient downside momentum and moved back above the 20 EMA at 92.60. Currently, the U.S. Dollar Index is trying to settle back below this level. In case this attempt is successful, it will move towards the 50 EMA which will be bullish for GBP/USD.

Today, foreign exchange market traders had a chance to take a look at inflation data from UK. Inflation Rate increased by 0.7% month-over-month in August compared to analyst consensus which called for growth of 0.5%. On a year-over-year basis, Inflation Rate grew by 3.2% compared to analyst consensus of 2.9%. Core Inflation Rate increased by 3.1% year-over-year.

Retail Price Index also exceeded analyst expectations as it increased by 0.6% month-over-month compared to analyst consensus of 0.5%. On a year-over-year basis, Retail Price Index grew by 4.8%.

Recent inflation reports may provide some support to the British pound. However, the market will likely remain nervous ahead of the Fed Interest Rate Decision on September 22.

Technical Analysis

GBP/USD managed to settle back above the 50 EMA at 1.3815 and is trying to settle above the next resistance level at 1.3835. A move above this level will push GBP/USD towards the resistance at 1.3865.

In case GBP/USD settles above the resistance at 1.3865, it will head towards the next resistance at 1.3880. A successful test of this level will open the way to the test of the resistance at 1.3900.

On the support side, the nearest support level for GBP/USD is located at the 50 EMA at 1.3815. If GBP/USD declines below this level, it will move towards the next support at 1.3800, although it can also receive some support at the 20 EMA near 1.3810. In case GBP/USD manages to settle below the support at 1.3800, it will head towards the support at 1.3780.

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