Compared to the other major currencies, gains on GBPUSD brought about by the FOMC statement were limited. The currency pair rose to its three-month highs at 1.2812 but gave up most of its gains to close at 1.2747 which translates to a 0.15% gain for the day.
As expected the FOMC kept rates unchanged between the range of 0.00% to 0.25%. What caught the market off-guard, however, was the central bank hinting that rate hikes will not happen until 2022. Consequently, the statement had a bearish effect on the dollar.
But why were gains on GBPUSD limited?
It could be that market participants are squaring their positions ahead of the UK’s April GDP report. Due tomorrow at 7:00 am GMT, the report is expected to print a contraction of 18.0% which would reflect the slowdown of activity caused by lockdowns.
A better-than-expected reading could push GBPUSD higher. On the other hand, a disappointing reading could further weigh down on the currency pair.
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GBPUSD Outlook
On the 1-hour time frame, it can be seen that the uptrend on GBPUSD remains intact. The currency pair is currently testing the rising trendline when you connect the lows of June 4 and June 9. Additionally, by drawing the Fibonacci retracement tool from the low of June 9 to the high of June 10, GBPUSD can also be seen bouncing off support at the 50% Fib level. A strong bullish candle has already formed which could indicate that there may be buyers in the market. If there is enough bullish momentum, we could soon see GBPUSD retest yesterday’s highs at 1.2812.
On the other hand, a strong close below the 100 SMA at 1.2700 could invalidate the uptrend. It could be a sign that sellers are dominating trading and that GBPUSD may soon fall to the lows of June 9 at 1.2617.
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