**GBP/USD Faces Resistance Near 1.3700 as USD Ticks Higher Ahead of Fed Rate Decision**
*By FXStreet News*
The GBP/USD pair is trading under pressure as the US Dollar regains ground ahead of a pivotal monetary policy meeting by the Federal Reserve. The recent price action highlights the pair’s struggle near the 1.3700 resistance level, with traders bracing for increased market volatility as central bankers prepare to set the tone for global financial markets.
## Fundamental Backdrop
After enjoying sustained bullishness in recent weeks, the British Pound finds its upward momentum challenged by renewed demand for the US Dollar. The greenback’s advance, fueled by hawkish expectations around the Federal Reserve’s interest rate policy, has capped gains in GBP/USD and left the pair vulnerable to downside shifts.
Key drivers influencing the pair include:
– Anticipation of the Federal Reserve’s latest policy move
– Shifts in US Treasury yields
– Macro data from both the UK and the US
– Ongoing COVID-19 developments
– Signals from Bank of England policymakers
### Federal Reserve in Focus
All eyes this week are on the Federal Reserve, which is set to deliver its interest rate decision. While no change is expected in the current rate, markets are pricing in a more aggressive stance on future rate hikes amid rising inflation and a solid US employment backdrop.
Market participants are keen to scrutinize:
– Updates on the Federal Reserve’s tapering plans
– Forward guidance on interest rates
– Projections for economic growth and inflation
– Comments from Chair Jerome Powell regarding risk factors and future policy normalization
Recent economic indicators have underscored robust activity in the US, prompting speculation that the Fed may adopt a faster tightening cycle. This speculation has provided underlying support for the US Dollar, bolstering its position against major currencies like the British Pound.
### US Economic Calendar
Several US economic data releases are guiding market sentiment ahead of the Fed’s announcement. Notably, the following reports have impacted the USD’s trajectory:
– Durable Goods Orders
– Consumer Confidence data
– Weekly Jobless Claims
– Core Personal Consumption Expenditures (PCE) Price Index
– GDP Advance Estimate
While data has generally supported a bullish USD narrative, volatility remains high as traders interpret both hard data and guidance from central bank officials.
### UK Developments
The UK’s economic outlook continues to be shaped by its battle with persistent inflation and Brexit-related trade challenges. Although the British economy has shown resilience, the Bank of England (BoE) faces complex choices as it seeks to balance growth and inflation risks.
Important UK-related factors include:
– CPI inflation data, signaling continued upward pressures
– Labor market reports, indicating tightening conditions
– Bank of England communication on the path of future rate hikes
– The evolution of COVID-19 policy responses
The BoE has already signaled a gradual path of tightening but remains cautious due to ongoing uncertainties.
## Technical Analysis: GBP/USD Struggles Below 1.3700
GBP/USD’s recent rally has begun to lose steam, with sellers stepping in near the 1.3700 psychological level. Technically, the pair remains below key resistance levels, and momentum indicators are flashing caution.
**Key technical highlights:**
– Immediate resistance stands near 1.3700
– Support can be found at 1.3620 and 1.3570
– The 50-day Moving Average (MA), currently around 1.3550, acts as pivotal support on pullbacks
– Fibonacci retracement zones from the January swing lows highlight 1.3620 and 1.3570 as inflection points
– Relative Strength Index (RSI) suggests consolidation rather than overbought conditions
### Bullish and Bearish Scenarios
A clear break above the 1.3700 mark is needed for bulls to regain control and aim for further gains toward 1.3750 and 1.3800. Yet,
Read more on GBP/USD trading.