GBP/USD Daily Forecast – Attempt To Settle Above 1.3350

U.S. Dollar Remains Under Pressure

GBP/USD is trying to settle above 1.3350 as the U.S. dollar remains weak against a broad basket of currencies after Fed’s decision to target an average inflation of 2%.

The U.S. Dollar Index has settled below 92.50 and made an attempt to get below the yearly lows near 92.10. In case the U.S. Dollar Index manages to get below 92.10, it will gain more downside momentum which would be bullish for GBP/USD.

The main problem for the U.S. dollar is that some traders have started to position themselves for years of low interest rates in the U.S. Inevitably, this prospect leads to increased pressure on the American currency.

In addition, the market looks ready to price in an increased probability of higher inflation, judging by the recent action in U.S. government bonds. The yields on 30-year U.S. government bonds have increased to 1.50%, a level not seen from June.

At this point, the fundamental situation remains favorable for the continuation of the current upside move of GBP/USD. With no important economic reports scheduled to be released today, GBP/USD trading dynamics will mostly depend on market sentiment.

Technical Analysis

GBP/USD managed to get above the resistance at 1.3270 and developed additional upside momentum. There are no material levels between 1.3270 and the next resistance at 1.3425 so GBP/USD may quickly move to the test of 1.3425 in case the right catalysts emerge.

RSI is located at moderate levels so there is plenty of room to develop more upside momentum. I’d note that additional resistance levels may be developed between 1.3270 and 1.3425, especially if the U.S. Dollar Index makes an attempt to rebound from current lows.

If GBP/USD manages to settle above the resistance at 1.3425, it will head towards the next resistance at 1.3515. The last time GBP/USD visited this territory was in December 2019.

On the support side, the previous resistance level at 1.3270 will likely serve as the first material support level for GBP/USD. In case GBP/USD moves below this support level, it will head towards the next support at the 20 EMA at 1.3165.#GBP/USD##FX#

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