GBP/USD drops to the 1.3200 area ahead of the FOMC statement

Pound erases UK CPI gains, turns negative versus US dollar.
GBP/USD key levels seen at 1.3300 and 1.3180.
Traders await the FOMC statement, its projections and Powell.

Matías Salord FXStreet

The US Dollar gained momentum during the American session amid a decline in equity prices and also ahead of the FOMC statement. GBP/USD dropped from weekly highs near 1.3285 to 1.3205, turning negative for the day.

The pound lost momentum and erased the gains that followed the release of higher-than-expected UK inflation data on European hours. Now, market participants have their attention set on the Fed.

The GBP/USD is moving sideways facing a strong resistance below 1.3300 while on the downside support is seen around 1.3180. Those two levels will likely be challenged during the next sessions.

Fed today, BoE tomorrow

The Federal Reserve will announce its decision at 19:00 GMT. The central bank will issue the statement and economic projections. Thirty minutes later Jerome Powell will deliver a press conference.

What the FOMC decides, its projections and Powell’s comments will likely rock markets, including the US dollar.

On Thursday, market participants will learn about the decision of the Bank of England. Market consensus sees no change in rates but some speculate with a rate hike amid rising inflation and an improvement in the labor market in the UK, offset by the surge of COVID cases. “We expect the BoE to leave policy on hold, with a message of COVID uncertainty and data dependency providing few clues to a February hike either, though they likely keep the option on the table. QE will conclude as expected this month”, said analysts at TD Securities.

Technical levels

GBP/USD

Overview
Today last price	1.3216
Today Daily Change	-0.0006
Today Daily Change %	-0.05
Today daily open	1.3222

Trends
Daily SMA20	1.3313
Daily SMA50	1.3502
Daily SMA100	1.3632
Daily SMA200	1.3778

Levels
Previous Daily High	1.3257
Previous Daily Low	1.3191
Previous Weekly High	1.3289
Previous Weekly Low	1.3161
Previous Monthly High	1.3698
Previous Monthly Low	1.3194
Daily Fibonacci 38.2%	1.3232
Daily Fibonacci 61.8%	1.3216
Daily Pivot Point S1	1.319
Daily Pivot Point S2	1.3158
Daily Pivot Point S3	1.3125
Daily Pivot Point R1	1.3255
Daily Pivot Point R2	1.3289
Daily Pivot Point R3	1.332

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

AUD/USD drops to two-week low, further below 0.7000 after RBA's less hawkish rate hike

AUD/USD drifts lower for the second straight day on Tuesday, hitting a fresh two-week low during the Asian session after the Reserve Bank of Australia's (RBA) widely expected 25 bps rate hike. The decision was far from unanimous, with three members preferring to hold rates at 4.60%. This tempers expectations of further tightening, which, along with modest US Dollar strength, weighs on the currency pair.

USD/JPY fails near 159.00 amid weak USD, intervention risks

USD/JPY edges lower during Tuesday’s Asian session, reversing part of the previous day's gains to 158.00 as the US Dollar remains depressed amid hopes for Iran diplomacy and ahead of US midterm elections. Meanwhile, intervention risks support the Japanese Yen, though the uncertainty over the timing of the next BoJ rate hike caps gains. This keeps the pair confined within a familiar range and warrants caution before placing directional bets.

Gold struggles below $3,950 amid Fed hike bets, ahead of US midterm elections

Gold weakens further below $3,950 during the Asian session, reversing part of the previous day's recovery from a one-year low set last week. Data released on Monday showed that US manufacturing sector business activity expanded for the 10th straight month in October. The Institute for Supply Management's Manufacturing PMI came in higher than consensus estimates and rose to 55.5 in October from 54.5 in the previous month. This reaffirms hawkish US Federal Reserve expectations, which along with rebounding US bond yields, prompt fresh selling around the non-yielding yellow metal.

Cardano extends losses as sellers stay in control

Cardano (ADA) extends correction, trading below $0.189 on Tuesday after losing key support zone the previous day. Mixed derivatives data and cautious on-chain metrics continue to weigh on bullish sentiment, while weakening technical indicators suggest further downside risks for ADA.

What a split Congress means for the US Dollar

The United States is going to the polls on Tuesday, and much is at stake. The mid-term elections mean the renovation of roughly one-third of the Senate and all 435 of the House seats. Additionally, special elections in Florida and Ohio will be held to fill the seats vacated by US Secretary of State Marco Rubio and Vice President JD Vance.

The 2% inflation target came from a throwaway remark. It now moves trillions

The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.