GBP/USD Daily Forecast – Hawkish Fed Provides Support To U.S. Dollar

British Pound Pulls Back Against U.S. Dollar

GBP/USD is currently trying to settle back below the support at 1.3535 while U.S. dollar is moving higher against a broad basket of currencies.

The U.S. Dollar Index has recently managed to get back to the resistance level at 96.25. In case the U.S. Dollar Index settles above 96.25, it will move towards the next resistance at 96.50 which will be bearish for GBP/USD.

Yesterday, U.S. dollar received support after the release of hawkish FOMC Minutes. The Fed looks ready to raise rates in the first half of this year in order to deal with high inflation. In addition, the Fed may begin to decrease the size of its balance sheet, which will have an immediate impact on bond markets. Not surprisingly, Treasury yields rallied, providing support to U.S. dollar.

Today, foreign exchange market traders will have a chance to take a look at the final reading of UK Services PMI report for December. Analysts expect that Services PMI decreased from 58.5 in November to 53.2 in December as the fast spread of Omicron put pressure on the services segment.

Technical Analysis

GBP/USD is testing the support level at 1.3535. In case this test is successful, GBP/USD will move towards the next support level which is located at 1.3500.

A move below the support at 1.3500 will open the way to the test of the next support level at 1.3460. In case GBP/USD declines below the support at 1.3460, it will head towards the support which is located at the 20 EMA at 1.3440.

On the upside, GBP/USD needs to get back above 1.3535 to have a chance to gain upside momentum in the near term. The next resistance level for GBP/USD is located at 1.3550.

If GBP/USD manages to settle above 1.3550, it will head towards the next resistance level at 1.3575. A move above this level will push GBP/USD towards the resistance at 1.3610.

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