GBP/USD Daily Forecast – Test Of Resistance At 1.3270

GBP/USD Video 28.08.20.

British Pound Tries To Break To New Highs

GBP/USD is testing the nearest resistance level at 1.3270 as the U.S. dollar is losing ground against a broad basket of currencies after Fed’s decision to target an average inflation of 2%.

The U.S. Dollar Index had a very volatile session yesterday and tested both the nearest support level at 92.50 and the nearest resistance level at the 20 EMA at 93.30.

The main driver for this volatility was the Fed’s decision to have an average inflation target instead of a firm inflation target, which will allow the Fed to keep rates low in case inflation goes above 2%.

Fed’s announcement had a significant impact on U.S. government bond yields which have increased to highs last seen in June.

U.S. House Speaker Nancy Pelosi and White House Chief of Staff Mark Meadows have recently discussed the new coronavirus aid package but failed to reach any consensus.

Democrats insist that the package should be worth at least $2.2 trillion while Republicans target a much smaller package. The two sides remain far apart which is a negative catalyst for the U.S. dollar and a bullish catalyst for GBP/USD.

Today, traders will take a look at U.S. Personal Income and Personal Spending data for July. Personal Income is expected to decline by 0.2% while Personal Spending is projected to increase by 1.5%, supported by the government stimulus.

Technical Analysis

GBP/USD is currently trying to settle above the nearest resistance level at 1.3270. In case this attempt is successful, GBP/USD will head towards the next resistance level at 1.3425 although additional resistance levels may develop along the way.

If GBP/USD manages to get above the resistance at 1.3425, it will have a chance to get to the test of the next resistance at 1.3515.

On the support side, the nearest support level is still located near the 20 EMA at 1.3110. No material support levels were formed between 1.3110 and 1.3270 so GBP/USD may quickly get back to the 20 EMA in case the U.S. dollar gains ground against a broad basket of currencies.

A move below the 20 EMA will lead to increased downside momentum and push GBP/USD closer to August lows at 1.2980.

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