GBP/USD Gains Ground Ahead Of U.S. Inflation Reports

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

GBP/USD is currently trying to settle above the resistance at 1.3635 while U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index has recently managed to get below the 50 EMA at 95.65 and is moving towards the support level at 95.40. In case the U.S. Dollar Index gets to the test of this level, GBP/USD will get more support.

Today, foreign exchange market traders wil focus on the ultra-important inflation reports from U.S. Analysts expect that Inflation Rate increased by 0.4% month-over-month in December. On a year-over-year basis, Inflation Rate is expected to reach 7%. Core Inflation Rate is projected to grow by 5.4% year-over-year.

U.S. dollar has recently found itself under pressure as yesterday’s comments from Fed Chair Jerome Powell were not as hawkish as expected. Meanwhile, Treasury yields pulled back from their recent highs.

However, the American currency may get more support while Treasury yields may move back to 2022 highs in case inflation exceeds analyst expectations. Today’s reports may have a significant impact on currency dynamics, so traders should be prepared for fast moves.

Technical Analysis

GBP/USD is currently testing the resistance level at 1.3635. In case this test is successful, GBP/USD will move towards the next resistance which is located at 1.3665.

A move above the resistance at 1.3665 will push GBP/USD towards the resistance at 1.3700. If GBP/USD gets above this level, it will move towards the resistance level at 1.3735.

On the support side, the previous resistance at 1.3600 will serve as the first support level for GBP/USD. If GBP/USD declines below this level, it will head towards the next support level at 1.3575. A successful test of the support at 1.3575 will open the way to the test of the next support level which is located at 1.3550.

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