FX.co ★ GBP/USD

The British Pound (GBP) is trading at around 1.3640 during Tuesday's European session. Despite a potential upward move in the US Dollar Index (DXY), GBPUSD is signaling strength. Currently, the US Dollar Index (DXY), which tracks the Greenback's valuation relative to six currencies, is trading slightly higher at around 99.10. The Pound Sterling is moving higher despite analysts' expectations that the Bank of England (BoE) will leave interest rates unchanged. Danske Bank analysts observe that UK inflation figures for July have met expectations, with the headline CPI moving up to "2.9% y/y (cons: 2.9%, prior: 2.6%), largely due to the 13% rise in Ofgem's energy price cap from 1 July." They point out that "core inflation edged a bit above expectations to 2.6% y/y (cons: 2.5%, prior: 2.6%)," whereas "services fell in line with expectations to 3.4% y/y (cons: 3.4%, prior: 3.6%)." The analysts at Danske argue that this "inflation print combined with yesterday's poor labour market numbers has taken the top off BoE pricing for the rest of the year." In the meantime, the US Dollar is rising against other currencies as investors fear that new US sanctions on Iran might push up oil prices and, ultimately, US Treasury yields. Currently, GBP/USD is trading around 1.3640, with a positive near-term outlook. The price remains above the 20-day EMA at 1.3531, implying a fundamentally supportive setup following the earlier rise. RSI(14), at the current level of 69, confirms strong upside momentum but is teetering on the brink of overbought territory. From a negative perspective, short-term support is identified at the 20-day EMA at 1.3530, below which the pair could move further downward toward previous lows not visible on current indicator charts. While the currency pair trades above this moving average, positive sentiment is expected to dominate. The technical environment of GBP/USD is considered "clearly bullish" by Scotiabank strategists, as "after range bound action and two tests of 1.3150 (April and June)," GBP/USD now seems more ready to move higher. According to the analysts of Scotiabank, "a break above 1.3650/60 suggests a move towards the 1.41 area over the course of the remainder of the year."