GBP/USD Daily Forecast – U.S. Dollar Attempts To Rebound After Major Sell-Off

GBP/USD Video 28.07.20.

U.S. Dollar Index Finds Support At 93.5

GBP/USD has managed to settle above the resistance at 1.2815 but failed to get above the next resistance which emerged near 1.2900.

The U.S. dollar is finally starting to rebound against a broad basket of currencies, and the U.S. Dollar Index has managed to settle above 93.5.

The U.S. Dollar Index is deep in the oversold territory so a technical rebound is not surprising.

However, it remains to be seen whether the American currency will be able to break the downside trend since demand for safe haven assets has shifted to precious metals while the market prepares for another round of U.S. monetary stimulus.

Republicans have presented their new coronavirus aid package worth $1 trillion. This package includes direct payments of $1,200 but cuts unemployment benefits from $600 per week to $200 per week.

After two months, the states should be ready to process a more sophisticated scheme that will provide workers with 70% of their previous pay. Challenging negotiations with Democrats lie ahead.

Traders will also start to focus on the upcoming Fed Interest Rate Decision which is due on Wednesday.

The rate is expected to stay unchanged since the Fed is not ready to take rates into the negative territory, so the market will pay attention to Fed’s comments.

These comments are expected to be dovish which may put additional pressure on the U.S. dollar.

Technical Analysis

GBP/USD gained upside momentum above the resistance at 1.2815 but did not manage to settle above the next resistance at 1.2900.

In case GBP/USD moves above 1.2900, it will head towards the next resistance at 1.2980.

On the support side, the previous resistance at 1.2815 will likely serve as the first support level for GBP/USD. A move below this level will open the way to the test of the major support level at 1.2750.

From a big picture point of view, GBP/USD has managed to get out of the previous trading range and is moving higher. The key catalyst for this move is the broad U.S. dollar weakness. In case U.S. Dollar Index settles below 93.5, GBP/USD will move to new highs.

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