GBP/USD Daily Forecast – U.S. Dollar Declines As Fed Remains Dovish

British Pound Is Moving Higher Against U.S. Dollar

GBP/USD is moving towards the resistance level at 1.3950 while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index is currently trying to settle below the support level at 92.15. In case this attempt is successful, the U.S. Dollar Index will get to the test of the next support at the 92 level which will be bullish for GBP/USD.

Yesterday, Fed Chair Jerome Powell reiterated his dovish message and stated that inflation pressures remained transitory. The Fed maintains its current asset purchase program, although some Fed members have started to discuss whether the Fed should reduce the purchases mortgage-backed securities before it reduces the purchases of Treasuries. The Fed will likely provide additional details about such discussions in Jackson Hole at the end of August.

The U.S. dollar lost ground against a broad basket of currencies after Fed’s comments as traders expected to see more clarity on the future reduction of asset purchase program. At this point, it looks that the Fed will not begin to reduce asset purchases before 2022, which is rather bearish for the American currency.

Technical Analysis

GBP/USD managed to get above the resistance at 1.3920 and continues its upside move. The next resistance level for GBP/USD is located at 1.3950. In case GBP/USD settles above this level, it will move towards the resistance at 1.3980.

A successful test of the resistance at 1.3980 will push GBP/USD towards the resistance at 1.4000. If GBP/USD manages to settle above this level, it will head towards the next resistance level at 1.4020.

On the support side, the previous resistance at 1.3920 will serve as the first support level for GBP/USD. In case GBP/USD declines below 1.3920, it will move towards the next support at 1.3900.

A move below 1.3900 will push GBP/USD towards the support which is located at the 50 EMA at 1.3880. A successful test of the support at the 50 EMA will push GBP/USD towards the support at 1.3865.

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