Bearish view
- Set the GBP/USD pair and set a take-profit at 1.1400.
- Add a stop-loss at 1.1600.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.1550 and a take-profit at 1.1650.
- Add a stop-loss at
The GBP/USD price declined slightly as investors waited for the latest Fed and Bank of England (BOE) rate decisions. It declined to 1.1473, which was the lowest level since October 26 and is about 1.61% below the highest point in October.
Fed and BoE decisions
The main catalysts for the GBP/USD pair will be the upcoming monetary policy meeting by the Fed and BoE. Thes meetings will provide more information about the state of the monetary policy between the two important central banks.
Economists agree that the Fed will hike interest rates by 0.75% when it concludes its meeting on Wednesday. However, they are divided about what the officials will do going forward. For example, analysts at Goldman Sachs, Bank of America, and UBS believe that the bank will continue with its aggressive policy in the next few meetings.
These economists argue that it is too early for the Fed to start pivoting since inflation remains at historic highs and the labor market is tight. Data published last week showed that the economy moved from a recession in Q3 despire high rates.
On the other hand, analysts at Morgan Stanley and JP Morgan said that they expect the Fed to start pivoting. Their fear is that the bank is hiking too fast and setting the US for a hand landing.
The GBP/USD will also react to the upcoming decision by the Bank of England (BoE). With UK’s inflation at an elevated level, analysts expect the bank to hike by another 0.75%. Some expect it to surprise with a 100 basis points hike.
On Tuesday, the pair will react to the latest Nationwide house price index (HPI) data. Experts expect that house prices continued dipping in October. A report by Zoopla estimated that home prices will drop by 5% in 2023.
GBP/USD forecast
The four-hour chart shows that the GBP/USD pair rose to a high of 1.1650, which was the highest point on September 13. It pulled back and crossed the key support point at 1.1500, the highest level on October 6. The pair remains slightly above the 50-day moving average while the Relative Strength Index (RSI) dropped below the neutral point at 50.
Therefore, the pair will likely continue falling as traders anticipate a more hawkish Federal Reserve. The next key support level to watch will be at 1.1400. A move above the resistance at 1.1550 will invalidate the bearish view.
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