The GBP/USD has surrendered the gains made in the last two trading days after dipping 0.61% as of writing this Tuesday. This move comes as investors start to realign their positions in expectation of an aggressive rate hike by the US Federal Reserve tomorrow.
The economic news calendar does not have anything of note on the Eastern part of the Atlantic divide. This leaves the pair totally at the mercy of US fundamentals. The action starts on Wednesday with the FOMC decision before the Advance US GDP data (q/q) is released on Thursday.
Analysts expect the US economy to grow 0.4%, compared with a contraction of 1.6% in the previous quarter. Friday will see the release of the Core PCE Price Index (m/m), which is the Fed’s key inflation barometer. Analysts expect this to have risen from 0.3% to 0.5%.
Monday’s violation of the 1.19991 resistance has been rendered of no effect by the intraday decline on the pair. This could have some implications for the pair ahead of the FOMC decision tomorrow. However, from a technical perspective, the fundamentals would appear to outweigh the technicals.
The intraday slide has truncated the breakout from the falling wedge on the daily chart. This brings back the chance of a push by the bears toward the 1.18061 support (12 July low). A decline below this price mark sends the pair toward the 1.16566 pivot (26 March 2020 low).
Below this pivot, further price deterioration makes 1.14538 available as another potential harvest point for the bears. This outlook benefits from a rate hike of 100bps by the Fed. Conversely, the bulls need to force a rejection from the intraday lows at 1.19666 (25 July low) and aim for a 3% closing penetration above 1.19991 to bring back the bullish sentiment.
This scenario will provide an opportunity to chase the 1.21673 resistance (4 July 2022 high) before the 1.22755 price mark enters the picture as another northbound target. 1.24167 is the completion point of the measured move from the wedge’s break, and a clearance of the 1.22755 barrier makes this target available as a harvest point for the bulls.