Is Cable going for a bounce or a break?
Both the pound and the dollar have top-tier announcements coming right up, so we might just see a burst of volatility in the next few trading sessions.
Take a look at these nearby inflection points that the pair might test soon.
GBP/USD 4-hour Forex Chart by TradingView
Check out GBP/USD pacing back and forth between support around 1.2615 and resistance at the 1.2775 area since mid-December!
Rangebound action has been the name of the game for most dollar pairs in the past weeks, as Fed policy expectations have been fickle.
For one, the FOMC projections already hinted at three interest rate cuts this year. However, recent U.S. data points suggest that there’s still a chance the U.S. central bank might push back on lower borrowing costs and opt to keep rates “higher for longer.”
So where will the upcoming FOMC statement lean? And how might Cable react to the BOE decision, too?
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your fundie homework on the British pound and the U.S. dollar, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
Market expectations are for another slightly hawkish tilt among BOE policymakers since inflation trends remain elevated. If so, GBP/USD could go for another bounce off support near S1 (1.2640) and possibly a move back to the range top at R1 (1.2770).
Technical indicators are hinting that support is more likely to hold than to break, as the 100 SMA is above the 200 SMA while Stochastic is heading higher to signal that buyers have the upper hand.
However, a break below the bottom of the range might be followed by a sustained selloff to R2 (1.2580) or even a drop that’s the same height as the rectangle chart pattern.
Just make sure you keep an eye out for hawkish Fed commentary and a potentially upbeat U.S. NFP release, as this could spur a Cable breakdown!