GBP/USD Tests Support At 1.3435

British Pound Is Under Pressure Against U.S. Dollar

GBP/USD is currently trying to settle below the support level at 1.3435 while U.S. dollar is moving higher against a broad basket of currencies.

The U.S. Dollar Index managed to settle above the resistance at 96.50 and is currently trying to settle above the next resistance level at 96.70. In case this attempt is successful, the U.S. Dollar Index will move towards the 97 level which will be bearish for GBP/USD.

Yesterday, the Fed left the interest rate unchanged, but Powell’s comments were hawkish. He highlighted inflation risks and stated that the Fed would reduce the size of its balance sheet. Not surprisingly, the markets have started to prepare for aggressive rate hikes, which was bullish for the U.S. dollar and bearish for riskier assets.

Today, foreign exchange market traders will focus on the economic data from U.S. Analysts expect that the fourth-quarter GDP Growth Rate report will show that GDP grew by 5.5% quarter-over-quarter. Durable Goods Orders are projected to decline by 0.5% month-over-month in December.

Initial Jobless Claims report is expected to show that 260,000 Americans filed for unemployment benefits in a week. Continuing Jobless Claims are expected to increase from 1.64 million to 1.65 million.

Technical Analysis

GBP/USD is currently testing the support level at 1.3435. In case this test is successful, GBP/USD will move towards the next support at 1.3420.

A move below the support at 1.3420 will push GBP/USD towards the support at 1.3390. If GBP/USD declines below this level, it will head towards the next support level at 1.3365.

On the upside, GBP/USD needs to get back above 1.3435 to have a chance to develop upside momentum in the near term. The next resistance level for GBP/USD is located at 1.3465.

In case GBP/USD settles back above 1.3465, it will head towards the resistance at 1.3490. A move above this level will push GBP/USD towards the 50 EMA at 1.3500.

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