GBPUSD In Range As Traders Wait For Fed Rate Signals

Summary:
• GBPUSD was restricted to a narrow range on Tuesday as traders waited for cues from Fed Chair Jerome Powell's congress speech.

GBPUSD inched higher on Tuesday as traders waited for the outcome of Fed Chairman Jerome Powell’s Congressional testimony. The pair was at 1.2803 at the time of writing, marginally down by 0.08 percent in the intraday session, as the market anticipated dovish remarks from Powell.

The BoE is expected to hold on to the current interest rates beyond August, and that will provide support to the GBPUSD pair in the near term. BoE Monetary Policy Committee member, Jonathan Haskel, stated on Monday that inflationary pressure was still strong enough to return above the 2 percent target. He added that there was no need to slash interest rates until there was enough evidence that inflation rate could be kept sustainably at 2 percent.

While the BoE seems to have contained inflation for now, it still faces challenges in the jobs market, with the June unemployment rate having hit 4.4 percent. BoE Chief Economist Huw Pill will speak on Wednesday, and his speech will shed light on the likely policy direction in the second half of the year.  

Meanwhile, Jerome Powell will continue with his testimony in Congress on Wednesday, and traders will have their ears on his comments regarding the Fed monetary policy. US Consumer Price Index (CPI) will be out on Thursday, and will give context to Powell’s comments. Also, the UK Office for National Statistics will release the country’s May GDP figures on Thursday, and that will have a bearing on investors’ positioning for the GBPUSD trading pair.

Technical analysis

The momentum on the GBPUSD trading pair points to control by the sellers. The downside will likely continue if resistance persists at 1.2786. The pair will likely find the first support at 1.2774, beyond which the next support could come at 1.2762. Conversely, if the pair goes above 1.2786, it will signal control by the buyers, and the upward motion will likely encounter the first resistance at 1.2803, a move beyond that mark will invalidate the downside narrative and could build the momentum to take GBPUSD to the second resistance mark at 1.2815.