GBP/USD stabilized thanks to a dovish Fed decision. The world's most powerful central bank decided to pledge patience on interest rate rises. In addition, they opened the door to modifying the scheme to reduce the balance sheet and will work on setting a final target its size. The message soothed markets and sent the greenback lower.
Brexit uncertainty
On the Brexit front, there is no specific event scheduled, but May may travel to Brussels or other capitals for talks. So far, the EU has been united in rejecting fresh negotiations. It will also be interesting to see if the PM can convince enough Labour members to support her, thus weakening the hand of hard-line Brexiteers.
A Norway-style agreement as some pro-Remain MPs from both parties want remains on the table. A general election or a second referendum cannot be discounted either. The most probable scenario is an extension of Article 50, delaying Brexit. No. 10 is opposed to such a move, but they have rejected other things in the past that eventually came to fruition.
GBP/USD Technical Analysis
GBP/USD is trading continues enjoying upside Momentum, which has not diminished with the recent slide. Moreover, the Relative Strength Index is outside the overbought territory, below 70, implying more gains are possible.
Cable is trading below a downtrend resistance line that accompanies it in the past few days but most indicators are positive.
1.3095 worked as a line in both directions in recent days. More importantly, 1.3150 prevented the pair from extending its gains after the Fed. 1.3220 is the cycle high. Further above, 1.3275 and 1.3300 date back to the autumn.
1.3040 is the fresh low and also capped cable in November. 1.3000 is a critical round number and also served as resistance in the middle of the month. 1.2925 was a temporary high on the way up and 1.2830provided support during the climb in mid-January.
Reference: FXStreet
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