Yahoo Finance GBP/USD Daily Forecast – Sterling at One Week High Ahead of BoE
The Dollar is Broadly Weaker Following the Fed Meeting
GBP/USD had already started climbing from near its lowest levels of the year but has furthered gains on the back of a weaker dollar.
The Federal Reserve released a statement and held a press conference on Wednesday, revealing a dovish shift. Policymakers expressed concerns regarding inflationary pressures and a decline in recent labor market data.
There was one member that was ready to cut rates yesterday, but the rest of the policymakers voted against it, opting to cut rates in 2020 instead. The Fed dropped the phrase “patient” from their statement which the markets had been looking for, to signal a shift towards an easing bias.
The Bank of England Meets Today
Retail sales data was released out of the UK earlier today. Sales were reported to decline half a percent in May as expected. Although there was a downward revision for the prior month. The data did not have a significant impact, as traders brace for the BoE meeting scheduled for later in the day.
The Bank is not expected to act today although there has been some talk of a potential rate hike coming out of the UK as of late. This is in sharp contrast to all other major economies that have shifted dovish.
Although they are not expected to act, the vote will be important as there is some potential for certain hawkish members to vote for a hike today.
Technical Analysis
GBP/USD is nearing a very significant technical hurdle at 1.2747. This level has held the pair lower since late May and was responsible for the turn lower earlier this month. GBP/USD was last seen trading about 35 pips from it.
Currently, the 4-hour 200 MA is near the level to give it a confluence. So I believe this will tend to be a major hurdle for the pair. If it does manage to scale it, the next level of focus is on 1.2813 which reflects a spike high in late May.
The same chart shows the 100 MA converging with a horizontal level at 1.2655. I think this level offers strong support on any dips.
On an hourly chart, the 200-period moving average is found just below 1.2655 and stands to hold any spikes lower. Looking at the downside momentum in the dollar, it seems very plausible we see an upside break in GBP/USD in the near future.
Bottom Line
The Fed meeting has triggered a broadly weaker dollar, GBP/USD is now exposed to risk from the BoE later today.
1.2747 is a major upside hurdle. If we do get above it, I expect some stops will get triggered.
I think dips to 1.2655 will be met with buyers.
This article was originally posted on FX Empire
