- Cable printed a fresh daily low at 1.3866 and bounced back to the upside.
- DXY is marginally higher before the Fed supported by higher Treasury yields.
The GBP/USD dropped to 1.3866, reaching a fresh daily low ahead of the FOMC decision. It then rebounded toward 1.3900. Cable shows no clear direction as markets participants await the outcome of the Federal Reserve meeting.
Yields keep rising; dollar limited ahead of Fed
Higher US yields keep the US dollar with a strong support but the rally is limited ahead of the FOMC. The 10-year year yield climbed to 1.68%, the highest since January of last year. The boost to the dollar has been modest so far. The DXY is marginally higher for the day as it keeps testing the 92.00 area.
Greenback’s gains appear to be limited as traders await the Fed’s decision. No change in monetary politic is expected. Attention will be on the new projections and on Powell. “We expect the Fed to revise higher its GDP growth and inflation projections. We expect the median dot for 2023 to continue signalling no rate hikes through 2023 although some individual dots are likely to show the first rate hike in 2023. We also anticipate Powell will repeat that discussions on tapering and rate hikes are premature”, explained analysts at Danske Bank.
On Thursday is the Bank of England who will announce its decisions. Rates and the purchase program are expected to remain on hold. “After Governor Bailey’s comments on Monday, we look for a slightly more hawkish outcome compared to last week’s preview, with no pushback against rising yields in the statement, but more concern from the doves in the minutes”, mentioned TDS analyst.
From a technical perspective, GBP/USD is moving sideways ahead of a risk event. The bias is not clear. The pair holds under the 20-day moving average (1.3945) and unable to move away from the 1.3900 area. A consolidation below 1.3850 would expose the 1.3800 area that if broken, could trigger a bearish acceleration toward 1.3750. On the upside, the critical level continues to be 1.4000. A close above would point to additional gains.
Technical levels
Share
