GBP/USD Reacts Bullishly Amidst Retracement and Central Bank...

GBP/USD Reacts Bullishly Amidst Retracement and Central Bank Caution

In line with our previous forecast, GBP/USD has undergone a retracement, finding support at the 61.8% Fibonacci level within a range area. However, the market remains cautious as investors and traders brace for upcoming interest rate decisions by the Bank of England (BoE) and the Federal Reserve (Fed) next week. Both central banks are expected to maintain their current monetary policies, but the focus will be on their guidance for interest rates throughout 2024.

Market Dynamics:

Despite the cautious sentiment, the GBP/USD pair displayed a robust response in the EU session, showcasing a strong bullish impulse. This morning's market activity suggests that traders are actively positioning themselves ahead of the central bank decisions.

BoE's Stance:

BoE policymakers are anticipated to abstain from discussions about rate cuts, given that the United Kingdom economy is grappling with significantly higher inflationary pressures compared to the United States. This distinction in economic conditions is a crucial factor influencing the central bank's decision-making.

Upcoming Data:

Before the Fed's interest rate decision, all eyes will be on the core Personal Consumption Expenditure (PCE) price index data for December, scheduled for publication at 13:30 GMT. This data will likely play a pivotal role in shaping expectations and market sentiment leading up to the Fed's decision.

Forecast:

Despite the cautious backdrop, our forecast for GBP/USD remains bullish, aligning with the morning's strong reaction and the overall technical setup. Traders are advised to stay vigilant, adapting their strategies as market dynamics unfold in response to central bank decisions and economic indicators.

Our preference

Long positions above 1.2600 with targets at 1.2850

Trade active:

✅ STILL ACTIVE