GBP/USD Daily Forecast – British Pound Pulls Back After Rally

U.S. Dollar Gains Ground After Powell’s Comments

GBP/USD failed to settle above the 20 EMA at 1.2990 and declined closer to the nearest support level at 1.2925 as the U.S. dollar gained ground against a broad basket of currencies after yesterday’s U.S. Fed Interest Rate Decision.

The U.S. Dollar Index settled above the 20 EMA at 93.15 and is trying to get above the resistance at 93.50 despite Fed’s promise to keep rates at the bottom until the end of 2023.

Traders were waiting for additional stimulus and found Powell’s comments disappointing as he did not talk about increasing asset purchases and focused on the low-rate environment.

Today, GBP/USD traders will focus on the Bank of England Interest Rate Decision. Just like the Fed, Bank of England is expected to leave the rate unchanged at 0.1% so the market will pay close attention to the bank’s asset purchases plans.

In addition to the Interest Rate Decision, traders will keep an eye on the latest U.S. employment data. Initial Jobless Claims are expected to decline to 850,000 while Continuing Jobless Claims are projected to drop to 13 million.

Technical Analysis

GBP/USD is currently pulling back after a major upside move. The nearest support level for GBP/USD is located at 1.2925. If GBP/USD manages to settle below this level, it will gain more downside momentum and head towards the next support level at 1.2880.

A move below the support at 1.2880 will open the way to the next support at 1.2815. I’d note that the recent upside move was very fast, and a potential sell-off may be equally fast.

On the upside, GBP/USD faced significant resistance at the 50 EMA at 1.2990. Most likely, GBP/USD will need additional positive catalysts to get above this level. If this happens, GBP/USD will head towards the next resistance level at the 20 EMA at 1.3025.

A move above the 20 EMA will signal that the current rebound has turned into a new upside trend. In this case, GBP/USD will have a chance to gain strong momentum and get closer to yearly highs. #GBP/USD##FX#

Reprinted from Fxempire, the copyright all reserved by the original author.