GBP/USD remains below resistance

Source: Dukascopy Bank SA


On May 1, US monetary policy makers, who decide upon the supply of the US Dollar, announced the Federal Funds Rate. The rate is used as a base rate for all USD denominated debt. The Fed has kept the interest rate unchanged at 5.50%, as the financial markets expected. In addition, the central bank has published the Federal Open Markets Committee Statement. The statement reveals the basing of the decision by the committee that decides upon the policy. The initial reaction to the news was a dip of the USD, as the Fed had reduced the balance sheet redaction to $300 billion from $720 billion when the program was started in 2022.

However, most price action occurred during the follow up press conference at 18:30 GMT up to 19:30 GMT. The press conference is more notable due to the Chairman of the Federal Reserve taking journalist questions. If the journalists do their job properly, they get more information out of the Chairman about the future supply and value of the USD.

In general, the Chairman said that the Fed is not thinking to do anything. It would take a lot of bad economic data for the Fed to cut interest rates. Meanwhile, potential hikes would take a lot higher than current inflation. Moreover, the Chairman expressed that inflation should decrease when the winter passes and shelter costs decrease. Namely, as people spend less for heating, inflation numbers are set to go down.

The GBP/USD reacted to the news by spiking up to the 1.2535/1.2540 range that was pierced. However, the 1.2550 level held and confirmed that the resistance range is wider. During the first half of Thursday's trading, the pair was fluctuating between the resistance zone and the support of the 50 and 100-hour simple moving averages.

A move below the moving averages is set to be slowed down by the 1.2500 and 1.2480 levels and the 200-hour simple moving average. These levels are capable of slowing down the pair, but not reversing its direction. The 1.2460 level and the range around it has shown to be capable to reverse direction of the pair. Further below, note the weekly simple pivot point at 1.2444 and the 1.2400/1.2420 range.

However, in the case of a surge, the pair would have to break the 1.2535/1.2550 zone. If a surge of the Pound against the US Dollar occurs, the weekly R1 could slow down the rate at 1.2588, before the 1.2600 is reached.
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