GBP/USD outlook: Extended narrowing range ahead of key events this week

GBP/USD

Cable is trading within a narrow range around 1.24 handle in European session on Monday, extending near-term directionless mode.

Bulls were capped by the base of descending weekly cloud (1.2455) and so far unable to register a clear break above 1.2400, but hold grip, as the price continues to move above ascending 10DMA (currently at 1.2371), which tracks the action since Jan 6 and marks solid support.

January action is on track to end in another long bullish candle (fourth straight month of gains), which is a bullish signal, though offset by weekly bearish Doji, overbought conditions and fading bullish momentum on weekly chart.

Daily techs remain in full bullish setup, but the action lacks strength for final push higher, awaiting fresh signals.

Traders eye key events this week – Fed and BOE rate decisions, which could provide direction signals.

The US central bank is widely expected to further slow the pace of tightening and raise its interest rate by 25 basis points, while the Bank of England would likely go for 50 basis points hike and push interest rate to 4%.

More hawkish stance from the BOE, compared to Fed, could be supportive for sterling, as this week’s hikes would also further narrow the gap between their monetary policies.

Res: 1.2446; 1.2455; 1.2500; 1.2544.
Sup: 1.2371; 1.2304; 1.2263; 1.2216.

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