GBP/USD Daily Forecast – U.S. Dollar Continues To Lose Ground

British Pound Gained Strong Upside Momentum

GBP/USD is trying to settle above the 50 EMA at 1.2935 as the U.S. dollar is losing ground against a broad basket of currencies on optimism about the new U.S. coronavirus aid package deal.

The U.S. Dollar Index managed to settle below the 50 EMA at 93.90 and is testing the next support level at the 20 EMA at 93.65. If this test is successful, the U.S. Dollar Index will gain additional downside momentum which will be bullish for GBP/USD.

The U.S. dollar is losing ground on signs that Republicans and Democrats may ultimately reach consensus on the new coronavirus aid bill. According to reports, Republicans proposed a package worth $1.5 trillion. Earlier, Democrats presented a $2.2 trillion aid bill.

While the two sides are still far apart, the gap is narrowing, and the negotiations are going in the right direction. The optimism about the new aid package boosts demand for riskier assets like British pound and puts pressure on the safe-haven dollar.

Today, GBP/USD traders will take a look at the final reading of UK Manufacturing PMI for September. Analysts expect that Manufacturing PMI declined from 55.2 in August to 54.3 in September. Numbers above 50 show expansion. A better-than-expected report may provide additional support to GBP/USD.

Technical Analysis

GBP/USD managed to get above the 50 EMA at 1.2935 and continues its upside move. RSI is in the moderate territory despite the strength of the recent rebound so there is plenty of room to gain more momentum.

If GBP/USD stays above the 50 EMA, it will head towards the next resistance level at 1.3000. A move above the resistance at 1.3000 will open the way to the test of the next resistance level at 1.3110.

On the support side, the nearest support level for GBP/USD is located at the 20 EMA at 1.2900. If GBP/USD manages to settle below the 20 EMA, it will gain downside momentum and move towards the next support level which has emerged at 1.2815.

If GBP/USD declines below 1.2815, it will continue its downside move and head towards the support at 1.2780. #GBP/USD##FX#

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