GBP/USD bulls are supporting the price in key weekly demand area

• GBP/USD holds in a key area of support on the weekly chart. 
• The Fed and BoE are both meeting this week, expected to raise interest rates. 

GBP/USD is attempting to stabilise in Tuesday's US session following a weak start in the morning as the US dollar took off. The moves in the greenback are aligning with a rally in US yields, with the 10-year yield moving in again on the recent highs, up 0.5% at the time of writing.  

Nevertheless, the pound has had some good news of late. A strong jobs report supported the prospect of a Bank of England rate hike for this month's meeting. The UK's Unemployment Rate fell more than expected to 3.9% in the three months to January, official figures showed, while vacancies hit a record high in the three months to February. meanwhile, money markets continue to fully price in a 25 basis points BoE interest rate hike on Thursday.

However, both the Federal Reserve and the BoE are expected to raise rates by 25 bps this week. What could weigh on the pound is the divergence in rhetoric between the two central banks. ''The MPC is likely to do so with far less enthusiasm,'' analysts at Rabobank said. ''A hike this week for the BoE would mark the third consecutive move and the voting pattern of MPC members is likely to illustrate far less conviction than in the February and December policy meetings.''

Meanwhile, there is a focus on Ukriane crisis for which cable has declined sharply since the start of the conflict. ''We expect the pound to remain on the back foot going forward,'' analysts at Rabobank said.  

''Among the weekend news was the rallying headlines from both Ukrainian and Russian officials that progress in diplomatic talks between the two sides could be established in the coming days.  This has led to a modest reduction in demand for safe-haven assets and allowed cable to pull away from its earlier lows.''

''That said, significant headwinds are facing the UK economy in the form of higher energy and tax bills and the Bank may already be running out of room to hike rates.,'' the analysts added further. ''Consequently, it is likely that relative to the Fed, the BoE will sound a more cautious note at this week’s policy meeting and this could weigh on cable.  In our view, cable could remain mostly within a GBP/USD 1.30 to 1.33 range in the coming months.''

GBP/USD technical analysis

In the start of the week's analysis, it was stated that ''the M-formation is mature and bulls will be in anticipation of a correction starting from within the demand area, as illustrated don the weekly chart above. A weekly bullish close is required to signal the prospects of the leg higher. ''