- GBP/USD trades in a narrow band below 1.2700 early Wednesday.
- The Fed will announce policy decisions and Chairman Powell will hold a press conference later.
- The pair's technical outlook is yet to show a build-up of directional momentum.
GBP/USD touched it lowest level in two weeks below 1.2650 on Tuesday but managed to stage a rebound in the late American session. The pair holds steady below 1.2700 on Wednesday as investors gear up for the Federal Reserve's (Fed) policy announcements.
Pound Sterling price this week
The table below shows the percentage change of Pound Sterling (GBP) against listed major currencies this week. Pound Sterling was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.14% | 0.12% | -0.28% | -0.12% | -0.45% | -0.60% | -0.19% | |
| EUR | -0.14% | -0.01% | -0.40% | -0.24% | -0.56% | -0.73% | -0.33% | |
| GBP | -0.13% | 0.01% | -0.40% | -0.24% | -0.55% | -0.73% | -0.32% | |
| CAD | 0.27% | 0.41% | 0.39% | 0.16% | -0.16% | -0.32% | 0.08% | |
| AUD | 0.12% | 0.24% | 0.23% | -0.17% | -0.33% | -0.48% | -0.08% | |
| JPY | 0.43% | 0.56% | 0.71% | 0.15% | 0.31% | -0.17% | 0.25% | |
| NZD | 0.57% | 0.71% | 0.72% | 0.32% | 0.45% | 0.14% | 0.38% | |
| CHF | 0.20% | 0.32% | 0.31% | -0.08% | 0.09% | -0.25% | -0.40% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
The Fed is forecast to hold the policy rate steady at 5.25%-5.5% following the first meeting of the year. Several Fed policymakers pushed back against the market expectation for a rate cut in March ahead of the blackout period and helped the US Dollar stay resilient against its rivals.
The probability of a rate reduction in March declined from 80% earlier in the month to nearly 40% heading into the Fed meeting, according to CME FedWatch Tool. The USD Index (DXY), which tracks the USD's valuation against a basket of six major currencies, is up 2% in January.
If the policy statement, or Fed Chairman Jerome Powell, adopts an optimistic tone about the continuation of the disinflationary process and refrains from confirming that there won't be a rate cut in March, the USD could come under renewed selling pressure and allow GBP/USD to turn north.
On the other hand, the USD could gather further strength in case the Fed confirms a delay in the policy pivot, citing better-than-expected growth figures for the fourth quarter and relatively tight conditions in the labor market.
GBP/USD Technical Analysis
Critical resistance is located at 1.2700 (200-period Simple Moving Average (SMA), 100-period SMA and 50-period SMA). If the pair rises above that level and confirms it as support, 1.2760 (static level) and 1.2780 (static level) could be seen as next bullish targets.
On the downside, 1.2650 (Fibonacci 23.6% retracement of the latest uptrend) aligns as first support before 1.2600 (psychological level, static level) and 1.2560 (200-day SMA).
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