(MENAFN- Daily Forex) Bearish view
Sell the GBP/USD pair and set a take-profit at 1.2310. Add a stop-loss at 1.2525. Timeline: 1-2 days.
Bearish view
Buy the GBP/USD pair and set a take-profit at 1.2525. Add a stop-loss at 1.2315.
The GBP/USD
exchange rate retreated slightly as the US dollar
index bounced back after falling sharply a few days ago. The pair peaked at 1.2525 on Monday and then dropped to 1.2425 ahead of the Fed interest rate decision.
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federal Reserve and Andrew Bailey's statement
The GBP/USD pair will be in focus on Wednesday as Andrew Bailey, the head of the Bank of England (BoE), delivers a closely watched statement. This statement will be important because it comes a few days before the upcoming central bank decision.
The BoE has embraced a more cautious tone than other central banks. It slashed interest rates two times last year, while the Fed and the ECB slashed them 3 and 4 times, respectively.
Analysts expect the bank to be more dovish this week because the economy is softening. Data released earlier this month showed that the economy barely grew in November, while inflation moved downwards slightly.
The main catalyst for the GBP/USD exchange rate will be the upcoming Federal Reserve interest rate decision. In it, officials are expected to maintain rates steady as they maintain their data-dependence.
Recent data has supported the case for a pause. Inflation has remained significantly above the Fed's target of 2.0%, while the unemployment rate is above 4.0%. Further cuts may lead to higher inflation for longer, especially as Donald Trump warns about universal tariffs from key countries like Mexico, Canada, and China/USD technical analysis
The four-hour chart shows that the GBP/USD pair has recovered modestly from this month's low of 1.2093 to a high of 1.2525.
It formed a series of higher highs and higher lows, which resulted into an ascending channel shown in purple.
The pair has now pulled back and moved below the lower side and moved to the 23.60% Fibonacci Retracement level. The Percentage Price Oscillator (PPO) has formed a bearish crossover, while the Relative Strength Index (RSI) has dropped and is nearing the neutral point at 50.
The pair will likely continue falling ahead of the upcoming Fed decision. If this happens, it will drop to the next point at 1.2310, the 50% Fibonacci retracement level. A move above the this week's high of 1.2525 will invalidate the bearish view.
EURUSD Chart by TradingView
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