GBP/USD Eyes Development Assist as US Greenback Awaits Fed Dot Plot

GBP/USD PRICE OUTLOOK: US DOLLAR HINGES ON FRESH FED GUIDANCE

GBP/USD at the moment hovers close to the decrease finish of its latest buying and selling vary after sliding 150-pips from its 31 Could swing excessive on the 1.4250-price stage. The Pound Sterling has probably confronted headwinds with covid circumstances on the rise throughout the UK once more. In actual fact, this simply prompted Prime Minister Boris Johnson to delay reopening efforts till 19 July.

In the meantime, the US Greenback seems to be holding up fairly properly regardless of final week’s sharp decline in ten-year Treasury bond yields. Maybe this follows US Greenback bears easing off the gasoline pedal on account of occasion danger posed by the FOMC fee resolution due on Wednesday. And to be truthful, the shorter finish of the Treasury yield curve (e.g. two-year) has not seen as a lot downward stress.

GBP/USD may prolong its drop if this week’s Fed assembly reveals a hawkish shift in financial coverage steering. Markets will probably pay shut consideration to the up to date Fed dot plot and language modified within the press assertion. Two FOMC officers upgrading their estimated midpoint goal vary for the federal funds fee would stand to sign liftoff for benchmark rates of interest by the tip of 2023. Any tweaks made to the ‘substantial additional progress’ goalpost may explicitly allude to the kickoff of Fed taper talks.

GBP/USD PRICE CHART: DAILY TIME FRAME (15 FEBRUARY TO 14 JUNE 2021)

Judging by US Greenback implied volatility readings, nevertheless, FX choices merchants see this as a comparatively low likelihood state of affairs. GBP/USD one-week implied volatility of 6.1% compares to the typical studying of 9.0% headed into the final six Fed conferences, which suggests the FOMC replace on deck will probably be an echo of the established order. That stated, the US Greenback may weaken and ship GBP/USD worth motion recoiling greater if Fed hawks are disillusioned and compelled to unwind taper bets.

This brings to focus ascending trendline help as a nearside layer of protection for GBP/USD bulls. Taking out this technical barrier may see GBP/USD problem its 50-day easy shifting common earlier than the 1.4000-level comes into consideration. Sustaining altitude round final week’s low may assist gas a rebound by GBP/USD worth motion towards the 1.4200-handle. Eclipsing the 10 June shut may invalidate the short-term bearish development and open up the door for GBP/USD to eye year-to-date highs.

Maintain Studying – US Greenback Outlook: DXY Goals Increased on Strong Knowledge, Taper Danger

— Written by Wealthy Dvorak, Analyst for DailyFX.com

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