GBP/USD Daily Forecast – Test Of Resistance At 1.3710

GBP/USD Video 21.01.21.

British Pound Continues To Gain Ground Against U.S. Dollar

GBP/USD is trying to settle above the resistance at 1.3710 while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index managed to get below the 20 EMA at 90.35 and is moving towards the 90 level as foreign exchange market traders focus on Biden’s stimulus plans. If the U.S. Dollar Index manages to get to the test of the 90 level, GBP/USD will get additional support.

Yesterday, UK reported that Inflation Rate increased by 0.3% month-over-month in December compared to analyst consensus which called for growth of 0.2%. On a year-over-year basis, Inflation Rate grew by 0.6%. Meanwhile, Core Inflation Rate increased by 1.4% compared to analyst consensus of 1.3%.

At this point, it is too early to tell whether inflation is moving higher in the UK. The country continues its battle against a new, more infectious strain of the virus, and the recent data suggests that UK made little progress on this front. Most likely, UK will have to keep current virus containment measures in place for more weeks than originally planned which may have a negative impact on consumer optimism and put pressure on prices.

Technical Analysis

GBP/USD is currently testing the nearest resistance level at 1.3710. Yesterday, GBP/USD made an attempt to settle above this level but failed to develop sufficient upside momentum. However, the current momentum looks strong, and GBP/USD has good chances to get above 1.3710.

If GBP/USD manages to settle above the resistance at 1.3710, it will head towards the next resistance level at 1.3755. A move above the resistance at 1.3755 will push GBP/USD towards the next resistance at 1.3785.

On the support side, the previous resistance level at 1.3665 will likely serve as the first support level for GBP/USD. If GBP/USD declines below this level, it will move towards the next support at 1.3625. A successful test of this support level will open the way to the test of the next support which is located at the 20 EMA at 1.3600.

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