The British pound (GBP/USD) is trading at around 1.2603 after the US interest rate decision. The market did not react to the announcement, because it had already been valued by the market.
In the afternoon of the American session, after the press conference of the Fed's Chairman, the dollar collapsed because the Fed is not willing to be much more aggressive.
Powell ruled out the possibility of a 0.75% increase, explaining that core inflation is peaking, though more evidence is needed for a more aggressive hike.
This comment acted against the US dollar and benefitted risk assets such as indices and stocks, which felt the relief and rebounded. The cyptocurrency market also perked up.
According to the 4-hour chart, we can see that the British pound is trading above the 3/8 Murray around 1.2451 and above the 21 SMA located at 1.2536.
In the chart, we can see the formation of a bullish pennant that was broken in the American session yesterday. A confirmation of a pullback is expected towards 1.2575 which is the daily pivot point or towards 1.2536 (21 SMA).
A technical bounce above both levels could be a positive signal to buy. GBP/USD is expected to rise in the coming days and could reach the 4/8 Murray at 1.2695 and the 200 EMA at 1.2905.
Conversely, if the British pound consolidates below the 1.2530 level, the currency pair is likely to resume its bearish move and we should avoid buying.
Our trading plan is to buy above 1.2536. We believe that in the coming days the British pound will recover and reach the psychological level of 1.3000.