GBP/USD tests 1.3901 resistance as markets react to Fed Powell presser, USD offered

• GBP/USD is holding bid around comments from Fed's chair Powell despite the Fed's hawkish hold statement. 
• Powell is speaking the US economic recovery higher, supporting prospects for tapering, yet the dollar is softer.

GBP/USD is trading near 1.3900 during the conclusion of the two-day Federal Open Market Committee meeting with what appears to be some 'temporary' US dollar weakness playing out.

The statement has been released and Fed's chairman, Jerome Powell, is currently speaking at a press conference. 

This event was widely seen as a placeholder meeting and the market's expectations have been widely met, so far. 

The market was looking for a modestly hawkish hold which is what the statement and press event, so far, has offered. 

Update: See below, but Powell flipped dovish and the US dollar was pressured.

Consequently, the markets are holding in a tight familiar range as the expectations of the acknowledgements of inflation risks, risks of the delta variant and discussions of tapering all came to pass.

The statement that the

"economy has made progress toward goals since setting the bar for taper in December and will continue to assess progress in coming meetings,"

should be received well by the US dollar bulls. 

FOMC Statement comparison

The changes that do stand out in the statement are as follows: 

1. The FOMC removed this entire line: "Progress on vaccinations has reduced the spread of COVID-19 in the United States".

2. An addition, "Not fully recovered".

3. The Fed "made progress" towards taper goals.

The following highlights the changes between the Jun 16, 2021 and Jul 28, 2021 FOMC meetings:

(Source: TD Securities)

Markets are now hinging on the words of the Fed's chair, Jerome Powell in the Press conference which has started. 

Watch Powell Presser Live

Key comments so far

''We are still a ways off from considering raising interest rates.'' 

 ''In near-term, risks to inflation are to the upside.''
''Has confidence in medium-term inflation will move back down.''

Powell speech: Delta variant may weigh on return to labor market

Powell speech: There is no numerical threshold currently for maximum employment

Powell speech: Committee discussed how asset purchases might be changed

Powell speech: Inflation could turn out to be higher, more persistent than expected

Powell speech: The labor market has a ways to go

The reaction to these comments in the US dollar is in contrast to the bond market's, so the moves to the downside in the greenback may only be a temporary knee jerk reaction. 

Update: Powell flipped dovish and effectively said inflation is of no concern yet the unemployment rate is of most importance. Hence the US dollar resumed the downside.

DXY 15-min chart

GBP/USD & US dollar technical analysis

Firstly, the US dollar should be analysed for a broad picture and the price has been tinkering on the edge of critical trendline support which is coming under pressure during the presser as follows:

This is a bullish backdrop for cable:

With that being said, there are prospects of a retest of the critical support block below from a daily perspective if the greenback turns around over the month-end: