**GBP/USD Finds a Floor at 1.3200 After Fed-Induced Sell-Off**
*Based on the analysis by ActionForex.com, originally written by Action Forex Contributors*
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The GBP/USD currency pair experienced notable volatility in the wake of the recent Federal Reserve meeting, where hawkish commentary sparked a risk-off move that weighed heavily on most major currencies. After plunging sharply from multi-month highs, cable managed to stabilize at the 1.3200 handle, which now emerges as key support. This article examines the recent price action, technical landscape, and fundamental drivers shaping the market outlook for GBP/USD.
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## Fed-Induced Volatility: Key Market Drivers
The Federal Reserve’s recent policy announcement was the primary catalyst for the sharp movements witnessed in GBP/USD. Key takeaways from the FOMC event include:
– The Fed maintained interest rates within the expected range, but sent a hawkish tilt through upgraded economic outlook projections.
– Dot plot forecasts signaled fewer rate cuts in 2024, suggesting rates may remain elevated for longer than previously anticipated.
– Chair Jerome Powell’s tone during the press conference further solidified market expectations of the Fed’s commitment to controlling inflation, emphasizing data dependency and patience in easing monetary policy.
The initial market reaction was a broad-based US dollar rally, as higher-for-longer rate expectations prompted a move away from riskier assets, including the British pound.
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## GBP/USD Technical Analysis
The post-FOMC environment has been characterized by pronounced volatility in GBP/USD, with multiple technical signals emerging as the pair searches for direction.
### **Recent Price Action**
– GBP/USD spiked to fresh multi-month highs near 1.3300 prior to the Fed announcement, buoyed by softening US data and persistent optimism over UK economic resilience.
– Hawkish Fed signals triggered a sharp correction, with the pair tumbling more than 100 pips in the event’s immediate aftermath.
– The decline found support around the psychologically significant 1.3200 mark, where buying interest steadied the slide.
### **Key Support and Resistance Zones**
– **Support at 1.3200:** This level corresponds with a prior breakout zone as well as technical confluence from the 20-day EMA, underlining its importance as a near-term floor.
– **Resistance at 1.3240-1.3250:** The post-Fed recovery rally encountered resistance around this area, reinforcing it as a key barrier to break for fresh bullish momentum.
– **Further support at 1.3150:** Should selling pressure resume, the next area of demand lies near recent swing lows at 1.3150, aligning with a horizontal support band from early June.
– **Upside targets above 1.3300:** Any decisive break above 1.3250 sets the stage for a retest of 1.3300 and potentially higher, should dollar momentum wane.
### **Indicators and Momentum Signals**
– Daily RSI pulled back from overbought territory in the sell-off, now resting near neutral (50-level), suggesting the corrective move may be running out of steam.
– Momentum indicators such as MACD reflect a loss of bullish impetus, but have yet to signal a clear reversal to the downside.
– The 20-day EMA is holding up beneath price action at 1.3200, affirming current support.
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## Fundamental Forces: UK Data and Fed Policy
Beyond technical levels, GBP/USD remains tethered to evolving central bank dynamics and macro data.
### **US Dollar Outlook**
– Greenback strength hinges on Fed policy rhetoric and evolving inflation data. The prospect of “higher for longer” US rates remains supportive of the dollar, capping gains in GBP/USD.
– However, slowing US growth or signs that the Fed might pivot dovish could swiftly reverse this narrative, with knock-on implications for currency pairs across the board.
### **British Pound Fundamentals**
– The Bank of England’s latest rate decision maintained
Read more on GBP/USD trading.