GBP/USD struggles around 1.3500 ahead of the FOMC

• The British pound slides in the New York session, some 0.10%.
• Market sentiment improvement since the Asian session underpins FX risk-sensitive currencies.
• GBP/USD is downward biased, but a Fed dovish hold could send the pair towards 1.3600.

As the New York session begins, the British pound slides for the second day in the week, ahead of the Fed monetary policy statement release. At the time of writing, the GBP/USD is trading at 1.3496.

Risk sentiment is upbeat, as portrayed by European stock indices in the green, and US equity futures point to a higher open. However, the Ukraine – Russia crisis looms. Despite investors’ good mood, market participants should be aware of geopolitical and central bank news crossing the wires.

UK's political domestic issues and a hawkish Fed weigh on the GBP

That, alongside domestic political issues spurred by the so-called “party gate” in No. 10 Downing Street, would dent the prospects of the GBP. Angela Rayner, Labour’s deputy leader, said that Conservative MP’s should stop propping the current PM, adding that he “should finally do the decent thing and resign.”

An absent UK economic docket leaves GBP/USD investors leaning on the greenback dynamics.

In the meantime, GBP/USD traders would take cues of the FOMC monetary policy meeting. The expectations are for a hawkish hold, though forward guidance of hiking rates and how soon the Quantitative Tightening (QT) would begin. Being the Fed’s first monetary policy meeting of 2022, there would not be any Summary of Economic Projections (SEP).

The GBP/USD was subdued during the overnight session for North American traders, around the 1.3490-1.3523 range, ahead of the FOMC meeting. The break of the 100-day moving average (DMA) lying at 1.3530 accelerated the fall near the 50-DMA at 1.3419. However, on Tuesday, the pair bounced off those levels and closed above 1.3500.

GBP/USD Price Forecast: Technical outlook

The GBP/USD is downward biased, per the location of the daily moving averages (DMAs), with the shorter time-frame below the longer time ones. However, the fact that price action broke above the 50-DMA, which lies at 1.3419, suggests that the pair might be subject to buying pressure in the near term. Nevertheless, unless the GBP/USD breaks above the 100-DMA at 1.3530, then that would open the door for further gains.

The GBP/USD first resistance would be the latter mentioned. A break above that level would expose a downslope trendline around 1.3550-60, which would expose the 1.3600 figure once broken. 

On the flip side, the first support would be January 25 daily low at 1.3436. A breach of the latter would send the pair tumbling to the 50-DMA at 1.3419, followed by the 1.3400 figure.