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The GBP/USD currency pair is presently in a phase of consolidation, following its encounter with resistance at the 1.2200 level. Stakeholders favoring the British Pound are currently in a state of respite. Preparing for the impending policy announcements scheduled by the Bank of England on the event known as ‘Super Thursday.’
GBP/USD experienced an upswing during the European trading hours on Tuesday. That primarily attributable to an improved risk sentiment, culminating in a climb to the 1.2200 threshold. However, in the latter part of the day, the US Dollar underwent a resurgence. Prompting a reversal of the pair’s daily gains. As of early Wednesday, the currency pair is exhibiting a narrow trading range centered around 1.2150. As market participants brace for the Federal Reserve’s policy decisions.
Market Expectations and Probabilities Surrounding Federal Reserve Policy Decisions
The consensus outlook anticipates that the Federal Reserve will maintain its existing policy rate without any adjustments. Consequently, market participants will be keenly observant of Chairman Jerome Powell’s proclamations pertaining to the future policy trajectory and will scrutinize the precise language employed within the official statement.
As reported by the CME Group FedWatch Tool, there exists a 27% probability of a 25 basis points interest rate hike occurring in December. Should the Federal Reserve emphasize the robust Gross Domestic Product (GDP) expansion witnessed in the third quarter and the robust employment figures in September as rationale for potential tightening. It is plausible that the US Dollar may exhibit strength relative to its peer currencies.
Also Read: GBP/USD pair above 1.2150, eyes on UK employment and PMI data
Conversely, in the event that the Federal Reserve departs from the consensus represented in the dot plot and articulates that heightened bond yields obviate the necessity for another rate increase, this could potentially exert downward pressure on the US Dollar and conceivably serve as a catalyst for an upward movement in the GBP/USD currency pair.
Technical Analysis and Key Levels for GBP/USD
The Relative Strength Index (RSI) indicator, as observed on the 4-hour chart, is currently displaying a lateral movement in proximity to the 50 level. This trend reflects the prevailing indecision within the GBP/USD market.
In the technical analysis, the 100-period Simple Moving Average (SMA) serves as an immediate point of resistance, located at 1.2175. This is followed by the 1.2200 level, which holds significance as it aligns with the Fibonacci 23.6% retracement of the most recent downtrend and coincides with the 200-period SMA. A 4-hour close above this level has the potential to attract technical buyers and pave the way for an extended upward movement toward the 1.2260 mark. Which is a statically significant resistance level.
Conversely, in terms of potential downside scenarios, the initial support rests at 1.2100, a level that combines static significance with psychological importance. Subsequently, the 1.2050 level. Which representing the conclusion of the latest downtrend, comes into play. Followed by the 1.2000 level, another psychological and static support level of significance.
Source: FX Street
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Disclaimer:
Please note that this article serves solely for informational purposes. As such, it is not financial advice. We strongly advise readers to conduct thorough research and consult with financial professionals before making any investment decisions.
