British pound rises against US dollar
GBP / USD is currently trying to stabilize above resistance at 1.3440 as the US dollar loses ground against a large basket of currencies.
The US dollar index is testing the major support level at annual lows at 90.50. Forex traders are selling the US currency ahead of the Fed’s interest rate decision to be announced today.
The Fed is expected to expand its asset purchase program, which will likely put more pressure on the US dollar. If the US dollar index moves below 90.50, it will gain bearish momentum and move towards the 90 level which will be bullish for the GBP / USD.
The UK reported yesterday that the unemployment rate fell from 4.8% in September to 4.9% in October compared to analysts’ consensus of 5.1%. Meanwhile, the Change in Beneficiary Numbers report said the number of people claiming unemployment benefits increased by 64,300 in November due to the negative impact of lockdowns.
Today, traders will have the opportunity to assess UK inflation data for November. The inflation rate is expected to increase 0.6% year over year, while the core inflation rate is expected to increase 1.4%.
In addition, the UK will release flash PMI reports for December. Analysts expect the Manufacturing PMI to drop from 55.6 to 55.9 while the Services PMI to drop from 47.6 to 50.5.
GBP / USD is testing the closest resistance level at 1.3440. If the GBP / USD moves above this level, it will head to the next resistance at 1.3485.
A move above resistance at 1.3485 will push GBP / USD towards 1.3500. In the event that GBP / USD does manage to settle above 1.3500, it will move to the next level of resistance at the December highs at 1.3540.
On the support side, a move below 1.3440 will push GBP / USD towards the support at 1.3400. If the GBP / USD drops below this support level, it will gain momentum on the downside and head to the next support at 20 EMA at 1.3345.
Most likely, the GBP / USD pair will remain very volatile until the UK and EU announce the final results of Brexit negotiations, so traders should be prepared for quick moves.
For an overview of all of today’s economic events, check out our economic calendar.