GBP/USD Daily Forecast – British Pound Pulls Back

GBP/USD Video 07.01.21.

British Pound Is Losing Ground Against U.S. Dollar

GBP/USD is testing the nearest support level at 1.3575 while the U.S. dollar is mostly flat against a broad basket of currencies.

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The U.S. Dollar Index was volatile during yesterdays trading session as foreign exchange market traders reacted to the unrest in Washington. It has made an attempt to settle above the resistance at 89.75 but failed to develop sufficient upside momentum and declined towards 89.50. If the U.S. Dollar Index manages to settle below the nearest support level at 89.40, it will move towards the recent lows near 89.20 which will be bullish for GBP/USD.

Yesterday, UK reported that Services PMI inreased from 47.6 in November to 49.4 in December compared to analyst consensus of 49.9. In the U.S., Services PMI declined from 58.4 to 54.8 compared to analyst forecast of 55.3.

Both reports lagged analyst expectations as the second wave of the virus put significant pressure on the services segment. At the same time, it remains to be seen whether the recent developments on the virus front will push traders to buy safe haven assets like the U.S. dollar as Democrats won Georgia elections and took control of the Senate, paving the way for additional stimulus which is bearish for the American currency.

[fx-article-ad]Technical Analysis

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GBP/USD managed to get below 1.3600 and is currently testing the support at 1.3575. If this test is successful, GBP/USD will head towards the next support level near the 20 EMA at 1.3540. This support level has already been tested several times during recent trading sessions and proved its strength.

A move below the 20 EMA will signal that GBP/USD lost upside momentum and is ready for a pullback. In this case, GBP/USD will move towards the next support level at 1.3500.

On the upside, the nearest resistance level for GBP/USD is located at 1.3625. If GBP/USD gets above this level, it will head towards the next resistance at 1.3665. A successful test of this level will open the way to the test of the resistance which is located near the recent highs at 1.3710.

For a look at all of todays economic events, check out our economic calendar.