GBP/USD Daily Forecast – Test Of Resistance At 1.3440

GBP/USD Video 16.12.20.

British Pound Moves Higher Against U.S. Dollar

GBP/USD is currently trying to settle above the resistance at 1.3440 while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index is testing the major support level at the yearly lows at 90.50. Foreign exchange market traders are selling the American currency ahead of the Fed Interest Rate Decision which will be announced today.

The Fed is expected to expand its asset purchase program which will likely put more pressure on the U.S. dollar. If the U.S. Dollar Index settles below 90.50, it will gain downside momentum and move towards the 90 level which will be bullish for GBP/USD.

Yesterday, UK reported that Unemployment Rate increased from 4.8% in September to 4.9% in October compared to analyst consensus of 5.1%. Meanwhile, the Claimant Count Change report indicated that the number of people claiming for unemployment benefits increased by 64,300 in November due to the negative impact of lockdowns.

Today, traders will have a chance to evaluate UK inflation data for November. Inflation Rate is expected to increase by 0.6% year-over-year while Core Inflation Rate is projected to grow by 1.4%.

In addition, UK will release flash PMI reports for December. Analysts expect that Manufacturing PMI grew from 55.6 to 55.9 while Services PMI increased from 47.6 to 50.5.

Technical Analysis

GBP/USD is testing the nearest resistance level at 1.3440. If GBP/USD settles above this level, it will head towards the next resistance at 1.3485.

A move above the resistance at 1.3485 will push GBP/USD towards 1.3500. In case GBP/USD manages to settle above 1.3500, it will move towards the next resistance level at December highs at 1.3540.

On the support side, a move below 1.3440 will push GBP/USD towards the support at 1.3400. If GBP/USD declines below this support level, it will gain downside momentum and head towards the next support at the 20 EMA at 1.3345.

Most likely, GBP/USD will remain highly volatile until UK and EU announce the final results of Brexit negotiations so traders should be ready for fast moves.

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