GBP/USD Daily Forecast – Test Of Resistance At 1.3785

GBP/USD Video 09.02.21.

British Pound Gains Ground Against U.S. Dollar

GBP/USD gained upside momentum and is trying to settle above the resistance level at 1.3785 while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index declined below the 50 EMA at 90.85 and is testing the next support level at the 20 EMA at 90.70. If this test is successful, the U.S. Dollar Index will move towards the next support at 90.50 which will be bullish for GBP/USD.

The recent data suggests that the situation with coronavirus in the world has improved materially in recent weeks which provides support to riskier assets like British pound.

The rise of U.S. Treasury yields, which was triggered by stimulus expectations, failed to provide enough support to the U.S. dollar which lost momentum against a broad basket of currencies.

The market expects that the U.S. will soon deliver a major stimulus package which would be close to Biden’s original $1.9 trillion proposal. As a result, inflation expectations are rising, pushing Treasury yields to multi-month highs.

Tomorrow, foreign exchange market traders will have a chance to take a look at inflation data for January which will show whether inflation is gaining steam. Inflation Rate is expected to grow by 1.5% year-over-year while Core Inflation Rate is also projected to increase by 1.5%.

Technical Analysis

GBP/USD managed to settle above the resistance at 1.3745 and is trying to settle above the next resistance level at 1.3785. The resistance at 1.3745 has been tested many times, and a move above this level is a major development for GBP/USD.

In case GBP/USD gets above the resistance at 1.3785, it will move towards the next resistance level at 1.3800. A move above 1.3800 will open the way to the test of the resistance at 1.3835.

On the support side, the previous resistance at 1.3745 will serve as the first support level for GBP/USD. If GBP/USD declines below this level, it will head towards the next support at 1.3710. A move below 1.3710 will push GBP/USD towards the support at the 20 EMA at 1.3690.

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