**GBP/USD Poised for Move: Can It Break 1.3586 After Fed Cut Signals?**
*By Skerdian Meta, FXLeaders Contributor*
The currency markets have been buzzing with anticipation as recent US Federal Reserve policy signals mark a key turning point for the GBP/USD pair. With the Fed indicating a dovish stance after its latest policy meeting, traders are increasingly eyeing whether sterling can capitalize and push past the notable 1.3586 resistance level. In this in-depth analysis, we will explore the economic context, technical setups, and future prospects for GBP/USD, drawing from the original insights of Skerdian Meta at FXLeaders.
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### The Federal Reserve’s Dovish Turn
At the heart of recent GBP/USD volatility is the anticipated shift in US monetary policy. The US Federal Reserve, facing persistent inflation and a softening labor market, has signaled its readiness to slash interest rates within the next policy cycles. This policy pivot was communicated through both the statement accompanying the Fed’s rate decision and follow-up comments by Fed Chair Jerome Powell.
Key considerations from the Fed’s signals include:
– Recognition that higher interest rates are now considered sufficiently restrictive to curb inflation.
– Indicative language that future rate increases are unlikely, shifting focus towards possible cuts.
– A new “wait and see” approach, with rate cuts likely on the table by late 2025 if inflation continues to cool.
This dovish message weakened the US dollar against its major peers, as lower yields typically erode the currency’s relative attractiveness.
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### UK Macroeconomic Environment: Supportive Yet Fragile
As the Fed barrels toward a looser policy, the UK economic outlook remains a blend of resilience and fragility.
#### Positive Forces
– Core and headline inflation in the UK remain above the Bank of England’s (BoE) 2% target, reducing pressure to cut rates immediately.
– The UK jobs market shows moderate strength, with wage inflation still running hot.
– Retail sales and consumer sentiment have experienced mild rebounds off recent lows.
#### Headwinds
– Weak manufacturing data and stagnant GDP growth indicate an ongoing struggle with stagnant demand.
– UK business investment remains subdued due to lingering Brexit adjustments and global economic uncertainty.
– The BoE, while less dovish than the Fed, hints at a gradual shift from its hawkish stance as energy prices stabilize.
Overall, UK fundamentals offer the pound some protection, yet persistent economic sluggishness could still cap sterling gains if risk aversion flares globally.
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### Technical Analysis: Eyes on 1.3586
The pivot in Fed expectations has significantly improved the technical landscape for GBP/USD bulls. Let’s break down the latest chart action and underlying setups.
**Weekly Chart Observations**
– GBP/USD recently bounced back from the 200-week simple moving average (SMA), traditionally a robust support level.
– The pair crossed above both the 50-day and 100-day SMAs, suggesting a developing bullish trend.
– Momentum indicators, including the RSI and MACD, have turned positive, reinforcing short-term buying pressure.
**Crucial Resistance Zone: 1.3586**
– The 1.3586 mark represents a major swing high from previous attempts to break out in early 2024.
– This level coincides with horizontal resistance extending back to late 2021.
– Success here could open the way to psychological barriers at 1.3700 and beyond.
**Buyer Triggers to Watch**
– Sustained close above 1.3586 on strong volume.
– Upward cross of shorter SMAs over longer ones, confirming a new trend leg.
– Bullish divergence in momentum oscillators.
**Bearish Risks**
– Failure at 1.3586 could produce a short-term double-top pattern, risking a retrace toward 1.3400 and the pivotal moving averages.
– Rising dollar on surprise US economic resilience or Fed hawkish reversals could stall sterling
Read more on GBP/USD trading.