**GBP/USD Price Analysis: Sterling Nears 1.3545 Breakout as Fed Decision Looms**
*By TradingNews.com Staff*
The British Pound (GBP) has been gaining momentum against the US Dollar (USD), with the GBP/USD pair approaching the significant resistance level at 1.3545 as markets brace for a key Federal Reserve (Fed) policy decision. Currency traders are digesting a blend of economic data, central bank commentary, and global risk sentiment, which are all playing crucial roles in shaping sterling’s price action. As investors anticipate potential volatility in both currencies, a clear understanding of the technical and fundamental setups is essential.
This article provides a comprehensive analysis of the recent movements in GBP/USD, the major factors behind the current rally, key technical zones to watch, and what to expect as the Fed’s decision draws near.
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## Sterling’s Recent Performance: Rally Driven by Economic Recovery Prospects
The GBP/USD pair has garnered broad-based interest following a robust string of economic data from the United Kingdom and a softer US Dollar environment. Over the past week, sterling has moved convincingly towards its pre-pandemic highs, riding on a wave of risk appetite and evidence that the UK economy could be on track for a faster-than-expected recovery.
### Factors fueling sterling’s rise include:
– **Strong UK economic data**: Recent figures have included better-than-expected GDP growth, upbeat retail sales, and a labor market that appears to be weathering the challenges of the pandemic.
– **Vaccine rollout optimism**: The UK’s successful COVID-19 vaccination campaign continues to bolster consumer and business confidence, paving the way for a swifter reopening.
– **Global risk-on sentiment**: Growing optimism regarding the global recovery is benefitting riskier currencies like sterling while putting pressure on traditional safe havens such as the US Dollar.
With these positive factors in play, the GBP has not only gained against the greenback but also outperformed other major currencies in recent sessions.
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## US Dollar Weakness: A Supportive Backdrop for GBP/USD
The US Dollar Index (DXY), a key measure of the dollar’s strength versus a basket of major peers, has slipped to multi-week lows as investors reposition ahead of the Federal Open Market Committee (FOMC) meeting. Dovish commentary from Fed officials, combined with expectations for continued monetary stimulus, has weighed on the dollar.
### Key elements impacting USD sentiment include:
– **Fed’s accommodative stance**: The central bank has repeatedly signaled its commitment to low interest rates and ongoing asset purchases until employment and inflation goals are met.
– **Inflation expectations**: Markets are debating whether recent inflation upticks represent a transitory phenomenon or something more sustained, a question that could influence Fed policy.
– **US fiscal policy**: The Biden administration’s fiscal stimulus packages have provided a double-edged sword for the dollar, boosting growth expectations but raising concerns over government borrowing and future inflation.
Against this backdrop, the dollar’s retreat has been instrumental in helping GBP/USD approach the crucial 1.3545 resistance level.
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## Technical Analysis: GBP/USD Eyes 1.3545 Breakout
From a technical perspective, the GBP/USD pair has been in a constructive uptrend since rebounding from the 1.3200 zone. Bullish momentum is building as the currency pair tests an important technical ceiling near 1.3545. A decisive close above this level could unleash further buying interest and set the stage for the next leg higher.
### Key technical highlights:
– **Support zones**: Initial support is located at 1.3460, followed by the 1.3400 round figure, which corresponds with the 50-day moving average.
– **Resistance levels**:
– Immediate resistance at 1.3545
– Next resistance levels at 1.3600 and 1.3700, where prior highs reside
– **Indicators**: The Relative Strength Index
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