GBP/USD Forecast: Bulls Eying Breakout of 1.3900, Awaiting Fed

• GBP/USD is retracing from yesterday’s highs near 1.3900.
• The broader trend still remains bullish despite the correction.
• Fed’s meeting could be decisive for the pair to find further directional bias.

The British Pound is trading in a very tight range against the US Dollar just ahead of the London session. On Tuesday, the GBP/USD forecast dynamics were influenced by data from the Confederation of British Industrialists. The index of changes in the volume of retail sales in July decreased from 25 to 23 points. Experts expected a decrease to 21 points. The indicator shows consumer spending and is the difference between the percentage of retailers who reported an increase in sales and those who reported a decrease.

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Today, the GBP / USD pair dynamics will be affected by the results of the meeting of the Federal Reserve System. Market participants are waiting for signals from the regulator about the possible timing of the gradual completion of the stimulating asset purchase. Today we do not have important fundamental statistics for the UK, and only the report on the house price index from nationwide will attract attention. It is unlikely that this indicator will seriously affect the position of the Pound.

Much will depend on the results of the Federal Reserve meeting. If Jerome Powell hints at cutting back on the asset repurchase program in the near future, the pressure on the Pound will return.

GBP/USD technical forecast: Bulls looking beyond 1.3900

On Tuesday, the GBP/USD pair slowed down the recovery near the 1.3900 mark. The 4-hour chart of the pair suggests that the price is well above the key 200-period SMA. The volume showed a clear bullish breakout as well. As a result, the trend for the pair has shifted to the buying side for now. The 20 and 50 SMAs are slowly creeping to the upside, lending additional support to the pair. We may see a mild retracement towards 200-period SMA or even towards the 20-period SMA, but it could only be a corrective decline before the further rise.

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In the meantime, buyers are focused on the resistance 1.3896, exceeding which will open the way to new local highs. A breakout and consolidation at this level with its reverse test from top to bottom will push the Pound to buy and rise to the zones at 1.3937 and 1.3978. A further target will be resistance at 1.4019. Finally, in case of a decline in the pair in the first half of the day, the bulls’ attention will move to support at 1.3854.

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