November 02,2022 04:32 AM ET
By:AnalysisWatch
GBP/USD attracted some downside buying on Wednesday and is moving away from a multi-day low touched the previous day, although it lacks follow-through. The pair maintained its bid tone throughout the early European session and currently sits just above the psychological 1.1500 mark.
Speculation that the Fed will ease its hawkish stance amid signs of a slowdown in the US economy is keeping dollar bulls on the defensive and offering some support to the GBP/USD pair.
However, traders seem reluctant to make aggressive bets and prefer to stay on the sidelines ahead of the risks of the central bank's key event. The Fed is scheduled to announce its policy decision this Wednesday, which will be followed by the Bank of England meeting on Thursday. Investors will be looking for further clues on the pace of the rate hike cycle, which in turn should help determine the next leg of a directional move for GBP/USD.
Overall, the recent corrective pullback from the vicinity of 1.1600, or a six-week high, constitutes the formation of a downtrend channel on the hourly charts. The upper end of that channel, currently around the 1.1545–1.1550 area, coincides with the 100-hour SMA and should act as a turning point.
Sustained strength beyond this level will be seen as a new trigger for bullish traders and will allow the GBP/USD pair to regain the 1.1600 round figure mark. Momentum could extend towards the 1.1645 area. Some follow-through buying would pave the way for an extension of the recent strong recovery from an all-time low.
On the other hand, the 200-hour SMA around the 1.1460 area could protect the immediate downside ahead of descending channel support near the 1.1410-1.1400 area.
A convincing break below will negate any near-term positive bias and make GBP/USD vulnerable to accelerating the decline towards the 1.1355–1.1350 area. The next relevant support is pegged near the 1.1300 round figure mark before spot prices eventually fall to the 1.1225-1.1220 region on the way to the 1.1200 level.