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  • While the dollar weakened moderately on Wednesday, GBP/USD gained positive momentum.
  • With risk appetite prevailing and US bond yields declining, the safe-haven dollar is under pressure.
  • As a result of the Fed’s hawkish expectations, the dollar’s decline should be contained and the pair’s upside limited.

The forecast for the GBP/USD pair is a bit positive amid improved risk appetite in the market, but the pair has failed to capitalize on the situation. In the early London session, GBP/USD price traded with a slight positive bias, most recently hovering around 1.3250.

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The GBP/USD pair recovered its positive momentum on Tuesday after finding some support ahead of the 1.3200 level thanks to moderate US dollar weakness. However, due to a decline in US Treasury yields, the dollar’s position as a safe-haven currency has been tested, and some support has been provided for other currencies.

The global risk sentiment remains supported by a waning concern about the new Coronavirus variant’s negative impact on the economy. Meanwhile, reports suggest that patients with Omicron had only mild symptoms. In the past two trading days, this resulted in a strong rally in global equity markets.

However, recent bullish moves have been slowed by rising geopolitical tensions; this, along with a faster Fed tightening, should help contain dollar losses. Meanwhile, the impasse between the UK and the EU, associated with the Northern Ireland Protocol, prevented traders from making aggressive bullish bets and limiting profits on the GBP/USD pair.

Investors believe the Fed will need to take more aggressive monetary policy measures to contain persistently high inflation. Therefore, market participants will pay close attention to the latest US CPI report on Friday, which could change the short-term dynamics of the dollar price and give the GBP/USD pair a new direction.

The dollar’s advance will also be impacted by general market sentiment and dollar price dynamics, providing GBP/USD traders with some trading opportunities. It is prudent to wait until strong follow-up purchases are made before positioning for increased profits when doing business without up-to-date news.

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GBP/USD price technical forecast: Rangebound behavior to continue

gbp/usd outlook

The GBP/USD price looks vulnerable around 20-period SMA on the 4-hour chart. The volume data shows no respite for the bulls, but there is no clear direction for the bears. Hence, we expect the price to stay within the broad range of 1.3200 to 1.3300. The average daily range is 34%, which shows a normal activity day.

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