As of writing, the markets have calmed down a little after the turbulent start of today's European trading session.
Market participants continued to assess the results of the Fed meeting that ended yesterday, at which the interest rate was expected to be raised by 0.75% to 3.25%. "Today, we've just moved into the very lowest level of what might be restrictive. There is a ways to go," Fed Chairman Jerome Powell said at a press conference following the meeting.
Thus, he reaffirmed the firm commitment of the Fed to achieve the target inflation rate of 2%. As we know, annual inflation in the US is at the level of 40 years ago, at 8.3%. According to the Fed, by the end of the year, the interest rate will reach 4.0%–4.4%, and in 2023, at 4.6%.
The Fed also expects GDP growth in 2022 at +0.2%, and in 2023 at +1.2%. Despite low growth, this is still not stagnation, although the situation is very close to deflation (high inflation against the background of zero growth or a decline in the economy).
Now market participants are preparing for a new jump in volatility. At 11:00 (GMT), the decision of the Bank of England on the interest rate will be published. The interest rate is assumed to be raised by 0.50% to 2.25%. In addition, economic forecasts will be published with an assessment of the likelihood of a recession in the economy.
The pound could weaken sharply if market participants consider the accompanying statements from the BoE to be soft or economic forecasts turn out to be depressing.
The GBP/USD pair is trying to develop an upward correction after reaching a local long-term low of 1.1212 during today's Asian session. As of writing, it is trading near the 1.1300 mark. But so far, its growth is limited by the nearest resistance levels 1.1410, 1.1432 (200 EMA on the 1-hour chart).
In the case of a resumption of decline, and this is our main forecast, a signal for building up short positions will be a breakdown of the local support level and today's low of 1.1212.
In the alternative scenario, the probability of growth to the resistance levels 1.1664 (200 EMA on the 4-hour chart) and 1.1760 (50 EMA on the daily chart) cannot be dismissed. But for now, short positions remain preferable. Below key resistance levels 1.2270 (144 EMA on the daily chart) and 1.2470 (200 EMA on the daily chart), GBP/USD remains in the long-term bearish market.
Support levels: 1.1212, 1.1200
Resistance levels: 1.1410, 1.1432, 1.1578, 1.1664, 1.1760
Trading Tips
Sell Stop 1.1280. Stop-Loss 1.1380. Take-Profit 1.1220, 1.1200, 1.1100
Buy Stop 1.1380. Stop-Loss 1.1280. Take-Profit 1.1410, 1.1432, 1.1578, 1.1664, 1.1760