GBP/USD Forecast: At risk of extending its slump on renewed dollar’s demand

Valeria Bednarik FXStreet

GBP/USD Current price: 1.3817

The Bank of England released its semi-annual Financial Stability Report.
The UK will publish June inflation data on Wednesday.
GBP/USD is under mounting selling pressure and poised to test the monthly low.

The GBP/USD pair ended Tuesday in the red around 1.3820, as the dollar benefited from unexpectedly higher US inflation, with the pair bottoming for the day at 1.3799. The Bank of England released its semi-annual Financial Stability Report, which showed that policymakers expect to maintain the rates at record lows at least until December 2021. “The economic outlook has improved, but risks to the recovery remain, especially those related to the spread of COVID,” the document shows.

On Wednesday, the UK will publish June inflation data. The Consumer Price Index is foreseen at 2.2% YoY, up from the previous 2.1%, while the core reading for the same period is foreseen steady at 2%. The Retail Price Index is expected at 3.4%, while the Producer Price Index is seen rising to 4.8%.

GBP/USD short-term technical outlook

The GBP/USD pair has an increased bearish potential in the near-term. The 4-hour chart shows that it has spent the US session below all of its moving averages, with the 20 SMA still heading higher although losing its bullish strength. The Momentum indicator is crossing its midline almost vertically, while the RSI turned lower at around 46, although with limited bearish strength. The pair has room to extend its decline toward the 1.3740 area, where it bottomed this July, with a break below it spurring additional selling.

Support levels: 1.3790 1.3740 1.3685

Resistance levels: 1.3940 1.3990 1.4035

View Live Chart for the GBP/USD

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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