GBP/USD Tests Support At 1.2770

Key Insights

• U.S. dollar continues to move higher after hawkish comments from the Fed. 
• British pound gained strong downside momentum.
• A successful test of the support at 1.2770 will push GBP/USD towards the support at 1.2730.

British Pound Is Under Strong Pressure

GBP/USD is currently trying to settle below the support at 1.2770, while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index managed to settle above the resistance at 101.35 and is testing the next resistance level at 101.55. In case this test is successful, the U.S. Dollar Index will head towards the resistance at 101.75, which will be bearish for GBP/USD.

There are no important economic reports scheduled to be reelased in the U.S. and UK today, so foreign exchange market traders will focus on general market sentiment.

The markets have recently started to price in the possibility of aggressive rate hikes from the Fed, which was bullish for the U.S. dollar. Interestingly, Treasury yields have not moved to new highs, but the American currency continued to gain ground against a broad basket of currencies.

Technical Analysis

GBP/USD is testing the support level at 1.2770. In case GBP/USD manages to settle below this level, it will move towards the next support level, which is located at 1.2730.

A successful test of the support at 1.2730 will open the way to the test of the next support level at 1.2710. If GBP/USD declines below this level, it will head towards the next support at 1.2690.

On the upside, GBP/USD needs to stay above 1.2770 to have a chance to gain upside momentum in the near term. The next resistance level for GBP/USD is located at 1.2800.

In case GBP/USD manages to climb back above the resistance at 1.2800, it will head towards the next resistance level at 1.2825. A move above this level will open the way to the test of the resistance at 1.2865.

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