GBP/USD Pulls Back After Recent Rally

U.S. Dollar Gains Ground Against British Pound

GBP/USD faced resistance near 1.3575 and pulled back while U.S. dollar gained some ground against a broad basket of currencies.

The U.S. Dollar Index has recently managed to get above the 96 level and is trying to get above the 20 EMA at 96.10. In case the U.S. Dollar Index manages to settle above the 20 EMA, it will get to the test of the resistance level at 96.25 which will be bearish for GBP/USD.

Today, foreign exchange market traders will have a chance to take a look at the final reading of UK Services PMI report for January. The report is expected to show that UK Services PMI declined from 53.6 in December to 53.3 in January.

While the UK Services PMI report may have some impact on currency dynamics, the main event of the day is the BoE Interest Rate Decision. Analysts expect that BoE will increase the rate to 0.5%. As usual, BoE commentary will have a significant impact on the dynamics of the British pound. In case BoE signals that inflation is a big problem and it is ready to act accordingly, GBP/USD may get more support.

Technical Analysis

GBP/USD did not manage to settle above the resistance level at 1.3575 and pulled back. Currently, it is trying to settle below 1.3550. In case this attempt is successful, GBP/USD will move towards the support level at 1.3535.

A successful test of the support at 1.3535 will open the way to the test of the support at the 20 EMA at 1.3515. If GBP/USD declines below the 20 EMA, it will head towards the next support at the 50 EMA at 1.3500.

On the upside, GBP/USD needs to settle above 1.3575 to continue its rebound. The next resistance level for GBP/USD is located at 1.3600.

In case GBP/USD manages to settle above 1.3600, it will head towards the resistance at 1.3625. A successful test of this level will open the way to the test of the resistance at 1.3650.

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