GBP/USD Sellers Eye Downtrend Continuation Amid Fed and BoE Decisions

Wednesday Market Overview:

The market’s attention is sharply focused on the Federal Reserve’s decision later today, following an unexpected rate hike by the Bank of Japan. This has bolstered the U.S. dollar against most major currency pairs, except the yen. Adding to the dollar’s strength, June’s job openings data came in slightly better than expected, providing additional support ahead of the Fed meeting, which is crucial for short-term market sentiment.

Technical Analysis:

The GBP/USD pair is entrenched in a downtrend on the hourly chart, marked by a series of lower highs and lower lows. The pair is currently trading below both its 34-period and 200-period moving averages, underscoring the bearish momentum. The price is fluctuating between resistance at 1.28527 and immediate support at 1.28325. The continuation of the downtrend depends on a decisive break below this support level, which could open the door for a decline toward the next key level at 1.28200. If sellers maintain their momentum and push the price below 1.28200, further declines toward 1.28111 and 1.27998 could follow, with 1.27873 as the mid-term target.

Alternative Scenario:

Conversely, should buyers successfully defend the 1.28325 support level, a potential rebound toward the 1.28527 resistance level could unfold. A break above this resistance would need to surpass 1.28655 to shift market sentiment toward a more bullish outlook.

Key Levels:

• Resistance Levels:
  • Resistance 2: 1.28655
  • Resistance 1: 1.28527
• Current Price (at the time of analysis): 1.28361
• Support Levels:
  • Support 1: 1.28325
  • Support 2: 1.28200
  • Support 3: 1.28111
  • Support 4: 1.27998
  • Support 5: 1.27873

Fundamental Factors and Market Sentiment:

In addition to the Federal Reserve’s policy meeting, today’s market dynamics will also be influenced by the release of the Chicago PMI and ADP employment reports, which could further impact the dollar. While the Fed is widely expected to hold rates steady ahead of its September meeting, attention will quickly shift to tomorrow’s Bank of England (BoE) meeting. The BoE is anticipated to adopt a more dovish stance, potentially considering rate cuts. This could exacerbate the British pound’s weakness against the U.S. dollar, reinforcing the current bearish trend.

Conclusion:

The GBP/USD pair remains under pressure as sellers focus on breaking key support levels, aiming for further declines. The upcoming Fed and BoE meetings are pivotal, with the market likely to react sharply to any surprises. A continuation of the bearish trend appears likely unless buyers can regain control and push the price above key resistance levels, shifting the outlook to a potential recovery.