GBP/USD Daily Forecast – British Pound Moves Higher As UK Inflation Exceeds Expectations

U.S. Dollar Is Under Pressure Against British Pound

GBP/USD continues its attempts to settle above the resistance at 1.3450 while the U.S. dollar is moving higher against a broad basket of currencies.

The U.S. Dollar Index faced resistance at 96.25 and pulled back towards the 96 level. In case the U.S. Dollar Index manages to settle back below 96, it will move towards the support at 95.75 which will be bullish for GBP/USD.

UK has recently reported that Inflation Rate increased by 1.1% month-over-month in October compared to analyst consensus which called for growth of 0.8%. On a year-over-year basis, Inflation Rate grew by 4.2% compared to analyst consensus of 3.9%. Core Inflation Rate increased by 3.4% year-over-year while analysts expected that it would grow by 3.1%.

The report provided immediate support to GBP/USD as foreign exchange market traders rushed to buy British pound on speculation that BoE will be forced to raise rates due to high inflation.

It should be noted that Retail Price Index has also exceeded analyst expectations, growing by 6% year-over-year in October compared to analyst consensus of 5.7%.

Technical Analysis

GBP/USD continues to test the resistance level at 1.3450. If GBP/USD manages to settle above this level, it will get to another test of the next resistance level which is located at 1.3470.

A successful test of the resistance at 1.3470 will push GBP/USD towards the resistance at 1.3500. In case GBP/USD gets above 1.3500, it will move towards the next resistance level at the 20 EMA at 1.3525. A move above the 20 EMA will open the way to the test of the resistance at 1.3560.

On the support side, a move below 1.3450 will push GBP/USD towards the support level at 1.3425. If GBP/USD manages to settle back below this level, it will head towards the support at 1.3400. A move below the support at 1.3400 will open the way to the test of the support at 1.3370.

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