GBP/USD Daily Forecast – U.S. Dollar Tries To Gain Ground Against British Pound

GBP/USD Video 05.11.20.

British Pound Is Under Some Pressure After Yesterday’s Volatile Trading Session

GBP/USD has settled below the 50 EMA at 1.2970 after a very volatile session on Wednesday while the U.S. dollar is losing some ground against a broad basket of currencies.

The U.S. Dollar Index has managed to get below the 20 EMA at 93.45 and tries to gain more downside momentum. The result of the U.S. presidential election is not yet known but the markets are calm, and yesterday’s initial support for the American currency has mostly evaporated.

Yesterday, UK reported that Services PMI decreased from 56.1 in September to 51.4 in October compared to analyst consensus of 52.3. The surge of coronavirus put significant pressure on the UK services segment, and Services PMI has a decent chance to get under 50 in November. Numbers below 50 show contraction.

Today, GBP/USD traders will focus on the Bank of England Interest Rate Decision. The rate is expected to stay unchanged at 0.1% but the Bank’s quantitative easing program is projected to increase from 745 billion pounds to 825 billion pounds.

In addition, traders will watch for any signs of negative interest rates in the future. If the Bank signals that negative interest rates are a real possibility, British pound will find itself under pressure.

Later in the day, the focus will shift to the U.S. Fed Interest Rate Decision. The Fed is also expected to leave the rate unchanged so traders will pay attention to the commentary.

Technical Analysis

GBP/USD is currently trying to settle below the 50 EMA at 1.2970. If this attempt is successful, GBP/USD will move towards the nearest support which has emerged at the lows of the recent trading session at 1.2915.

A move below this support level will open the way to the test of November lows at 1.2855. If GBP/USD declines below this level, it will gain additional downside momentum and head towards the next support level at 1.2815.

On the upside, the nearest resistance is located at the 50 EMA at 1.2970, followed by the resistance at the 20 EMA at 1.2980. If GBP/USD settles above the 20 EMA, it will gain upside momentum and head towards the next material resistance level at 1.3070. A move above the resistance at 1.3070 will open the way to the test of the next resistance at November highs at 1.3140.

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