GBP/USD Daily Forecast – U.S. Dollar Gains Ground Ahead Of Inflation Data

U.S. Dollar Continues To Move Higher Against British Pound

GBP/USD continues its attempts to settle below the support at 1.3835 while the U.S. dollar is moving higher against a broad basket of currencies.

The U.S. Dollar Index is currently testing the resistance level at 93.10. If the U.S. Dollar Index manages to settle above 93.10, it will move towards the resistance  near yearly highs at 93.40 which will be bearish for GBP/USD.

Today, foreign exchange market traders will focus on inflation data from U.S. Analysts expect that Inflation Rate increased by 0.5% month-over-month in July. On a year-over-year basis, Inflation Rate is projected to grow by 5.3%. Core Inflation Rate is expected to increase by 4.3% year-over-year.

The market will be sensitive to inflation data after the recent Non Farm Payrolls report which exceeded analyst expectations. If inflation remains at high levels, U.S. dollar will get more support as traders will bet that Fed will reduce its asset purchase program in the fourth quarter of this year.

I’d note that bond traders are positioning themselves for strong inflation data as Treasury yields keep moving higher. Currently, the yield of 10-year Treasuries is trying to settle above the 50 EMA at 1.3635%. A move above this level will push the yield of 10-year Treasuries towards 1.40% which will be bullish for U.S. dollar.

Technical Analysis

GBP/USD is currently trying to settle below the support at 1.3835. In case GBP/USD manages to settle below this level, it will head towards the next support at 1.3800.

A move below the support at 1.3800 will push GBP/USD towards the support at 1.3780. If GBP/USD manages to settle below this level, it will head towards the next support at 1.3745. A successful test of the support at 1.3745 will open the way to the test of the support at 1.3710.

On the upside, a move above 1.3835 will push GBP/USD towards the 20 EMA at 1.3855. In case GBP/USD manages to settle back above the 20 EMA, it will head towards the next resistance level which is located at the 50 EMA near 1.3880.

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