GBP/USD Daily Forecast – U.S. Dollar Rebounds As Fed Is Not As Dovish As Expected

GBP/USD Video 20.08.20.

British Pound Finds Itself Under Pressure

GBP/USD returned back under 1.3100 after FOMC Minutes indicated that Fed was not going to take a more dovish stance, at least in the near term.

The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has rallied above 93 as traders rushed to close their short positions in the U.S. dollar.

It remains to be seen whether the rally will be sustainable since the catalysts that were pushing the dollar lower are still in play – there is a significant uncertainty regarding the future pace of the economic recovery in the U.S. while Republicans and Democrats can’t find consensus on the new coronavirus aid package.

Today, the market will focus on U.S. employment reports. Initial Jobless Claims are expected to decline to 925,000 while Continuing Jobless Claims are projected to fall to 15 million.

Any additional problems on the job front will likely serve as a bearish catalyst for the American currency. While the rebound after the release of FOMC Minutes was strong, it is too early to say that the trend has changed. In this environment, the U.S. dollar will need more catalysts to continue its upside move.

Technical Analysis

GBP/USD experienced a major sell-off and returned back below 1.3100. The sell-off was driven by the market’s reaction to FOMC Minutes so levels were mostly ignored.

However, the situation has stabilized and previous support/resistance levels are still in play.

The nearest support level for GBP/USD is located at the 20 EMA at 1.3040. In case GBP/USD manages to get below this level, it will head towards August lows at 1.2980 but may also face support at 1.3010.

On the upside, the nearest resistance level for GBP/USD is located at 1.3110. A move above this level will provide a chance to get to the test of the next resistance at 1.3200.

In case GBP/USD manages to settle above 1.3200, it will head towards the recent highs near 1.3270.

From a big picture point of view, the upside trend in GBP/USD is still intact despite the major sell-off. However, it looks like GBP/USD will need very strong catalysts to settle above 1.3200 as all recent visits into this territory ended with a sell-off.

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