GBP/USD Price Forecast: VCP breakout likely after Fed-BoE policy announcements

GBP/USD rises to near 1.3345 as the US Dollar faces selling pressure.
Renewed US-Iran peace hopes have weakened the US Dollar.
The Fed and the BoE are expected to leave interest rates steady this week.

Sagar Dua FXStreet

The British Pound (GBP) is up 0.15% to near 1.3345 against the US Dollar (USD) during the European trading session on Monday. The GBP/USD pair gains as the US Dollar faces selling pressure due to renewed hopes of a United States (US)-Iran diplomatic solution, following the pause in military aggression in the Middle East.

Over the weekend, the US military confirmed that further attacks on Iran would be unnecessary as the target list has been exhausted.

In the European trade, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.25% lower to near 101.20.

Meanwhile, US ambassador to the United Nations (UN) Mike Waltz also said in an interview with Fox News that President Donald Trump wants to give negotiations a “little bit of room”, while forces remained locked and loaded, The Guardian reported.

This week, investors will pay close attention to monetary policy announcements by both the Federal Reserve (Fed) and the Bank of England (BoE) on Wednesday and Thursday, respectively. Both central banks are expected to leave interest rates unchanged.

GBP/USD technical analysis

GBP/USD trades higher at around 1.3344, but is still close to the 20-day Exponential Moving Average (EMA), which is at 1.3370, indicating a neutral near-term outlook. The formation of a Volatility Contraction Pattern (VCP) also suggests that the overall trend is neutral.

The Relative Strength Index (14) near 47.00 reflects lackluster momentum rather than a decisive directional push.

On the topside, immediate resistance is located at the descending trend-line zone referenced near 1.3467, followed by the July 15 high at 1.3558. On the downside, last week's low at 1.3300 is the key support level, with June's low at 1.3140 remaining a major cushion. A breakdown below 1.3140 would expose the pair to the psychological level at 1.3000.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Economic Indicator

BoE Interest Rate Decision

The Bank of England (BoE) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoE is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Pound Sterling (GBP). Likewise, if the BoE adopts a dovish view on the UK economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for GBP.

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