GBP/USD forms descending triangle in anticipation of the Fed decision

Summary:

GBP/USD is trading within the descending triangle ahead of the Fed decision on interest rates and overall health of the economy.

GBP/USD is still on downward trend that has existed since it hit a 3-year high towards the end of February. On Wednesday, the currency pair was down by 0.1% at $1.3905. Over the past two session, the pair has been on a consolidation pattern as investors await today’s Fed decision. The central bank’s tone regarding inflation expectations and the overall health of the US economy will offer cues for the direction of the greenback and GBPUSD. While Fed is likely to maintain the current policy as it is, the hike of interest rates is likely to occur earlier than expected.

GBP/USD Technical Outlook

On a 2-hour chart, the GBPUSD pair is currently trading within a descending triangle. If you are familiar with our forex trading course, you are aware that the triangle is a continuation pattern that occurs during a downtrend. Since late-February, the GBP/USD has dropped from its 3-year high of about $1.4245 to its current 1.3910.

If the currency pair continues to trade within the descending triangle, that will be a sign that the bearish trend is likely to continue. In that case, the target to look out for will be the prior support level of $1.3812. This outlook is founded on the fact that the GBP/USD is likely to experience significant volatility following the awaited Fed decision on interest rates.

However, if it manages to move past the diagonal line on the upside, the levels to watch out for are the psychological mark of $1.4000 and the prior peak of $1.4245.