GBP/USD: Rebound remains capped below 1.2100 ahead of the Fed

GBP/USD extends the bounce ahead of the critical Fed outcome.
US dollar retreats alongside yields and amid a rally in EUR/USD.
BOE is set to hike rates by 25 bps while the Fed could go for a 75 bps hike.

Dhwani Mehta FXStreet

GBP/USD is consolidating the steep upsurge below 1.2100, as bulls take a breather after extending the recovery by over 150 pips.

The main catalyst behind cable’s impressive rebound could be linked to the broad-based US dollar correction, as investors take profits off the table on their USD longs ahead of the all-important Fed interest rate decision. The Fed pre-committed to a 50 bps rate hike in June and July, although markets have baked in a 75 bps lift-off after Friday’s hot US inflation.

Meanwhile, the pick up in the EUR/USD recovery following news that the ECB has called on an emergency meeting to discuss the recent sell-off in the bond market. The euro capitalized on the ECB news, as it fuelled hopes that the central bank was ready to act on the market turmoil. The renewed uptick in the main currency pair triggered a fresh downswing in the dollar across its main peers, boding well for the beleaguered pound.

On Thursday, the Bank of England (BOE) monetary policy decision will take the center stage after Wednesday’s Fed outcome is out of the way. The BOE Is widely expected to hike the key rates by 0.25 bps to 1.25% this month.

Although a surprise 50 bps rate hike remains on the table amid higher inflation expectations and hopes that the BOE could take a strong action to control inflation.

Ahead of these central bank policy outcomes, the US Retail Sales data will be eyed for near-term trading impetus. The data, however, is unlikely to drive markets.

Also read: GBP/USD Price Analysis: Rebounds as bearish channel target achieved, Fed awaited

GBP/USD: Technical levels to consider

GBP/USD

Overview
Today last price	1.2080
Today Daily Change	0.0080
Today Daily Change %	0.67
Today daily open	1.1997

Trends
Daily SMA20	1.2481
Daily SMA50	1.2609
Daily SMA100	1.297
Daily SMA200	1.3253

Levels
Previous Daily High	1.2208
Previous Daily Low	1.1934
Previous Weekly High	1.2599
Previous Weekly Low	1.2301
Previous Monthly High	1.2667
Previous Monthly Low	1.2155
Daily Fibonacci 38.2%	1.2039
Daily Fibonacci 61.8%	1.2103
Daily Pivot Point S1	1.1884
Daily Pivot Point S2	1.1772
Daily Pivot Point S3	1.1609
Daily Pivot Point R1	1.2159
Daily Pivot Point R2	1.2321
Daily Pivot Point R3	1.2433

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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