After rising above the 1.36 mark during the European session, the GBP/USD pair went into a consolidation phase as investors started to take their profits off the table ahead of the critical FOMC meeting. As of writing, the pair was trading at 1.3550, still up 0.35% on the day.
Earlier in the day, the data from the UK revealed that retail sales increased by 1% on a monthly basis in August, lifting the annual change to +2.4%. Moreover, July's data was revised up to 0.6% from 0.3%. Fueled by the upbeat data, the GBP gathered strength against its peers.The GBP/USD pair jumped to a fresh daily high at 1.3603 while the EUR/GBP pair lost more than 50 pips in a quick manner.
However, investors are looking to step away from the markets before the FOMC announces its monetary policy decisions and publishes the updated economic projections report and its infamous 'dot plot' chart.Chairwoman Yellen will also be giving a press conference at which she will be responding to questions from the media.
"We expect the statement and press conference to contain only minor changes in language about the path of short-term rates. That is, we do not expect the statement or the press conference to be hawkish or dovish about a possible hike in December. Instead, over the next several months until the December meeting, we expect more vocal debates over the causes of weaker-than-expected-inflation and the role that financial conditions should play in policy decisions," Nomura analysts wrote in a recent report.
Technical outlook
With today's upsurge, the RSI indicator on the daily graph rose back to the oversold territory above the 70 handle, suggesting that the pair could have a difficult time extending its gains. 1.3500 (psychological level) remains as a critical support for the pair ahead of 1.3380 (Sep. 15 low) and 1.3180 (Sep. 14 low). On the upside, resistances could be seen at 1.3615 (Sep. 15 high), 1.3660 (Jun. 24/Brexit referendum closing level) and 1.3700 (psychological level).
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