GBP/USD ahead of the Fed announcement
The sterling managed to reverse the strong bearish trend on Friday, after the disappointing US unemployment report put a halt to the greenback’s recent gains. GBP/USD found strong support at the 1.53 level and at the time of writing the pair is hovering around the 1.55 level, as investors appear willing to move out of the safe haven dollar and take on more risk. Today’s Fed announcement is likely to send the pair higher, should Bernanke make any reference to quantitative easing. However, as the UK is also likely to go for more easing, the GBP/USD could soon become a battle between two central banks, providing further volatility to the market. From a technical point of view, after reaching the 2012 lows from January the market is now well oversold, which allows for a corrective bounce. First target for the bulls to watch sits at 1.5495, the 23.6% Fibonacci retracement from April high to May lows. A break and close above this level would open the door for the 1.5600-1.5800 area. Only a break below Friday’s low at 1.5269 would indicate a resumption of the underlying bear trend.
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