GBP/USD Price Analysis: Bulls have the upper hand near five-month top, FOMC awaited

• GBP/USD steadily climbs back to the 1.2400 mark amid a modest USD weakness.
• The formation of an ascending channel supports prospects for additional gains.
• Traders now look to the key FOMC policy decision for a fresh directional impetus.

The GBP/USD pair edges higher for the fifth successive day on Wednesday and climbs back closer to the 1.2400 mark during the first half of the European session. Spot prices, however, remain below a five-month high touched on Tuesday as traders await the highly-anticipated FOMC policy decision before placing fresh bets.

In the meantime, bets for a relatively smaller 50 bps Fed rate hike keep the US Dollar depressed near its lowest level since late June. Apart from this, a positive risk tone further undermines the safe-haven buck, which, in turn, is seen offering some support to the GBP/USD pair. The intraday uptick, meanwhile, seems rather unaffected by softer-than-expected UK consumer inflation figures released earlier this Wednesday.

From a technical perspective, the recent rally witnessed since late September along an upward-sloping channel constitutes the formation of an ascending channel. This points to a well-established short-term bullish trend and supports prospects for additional gains. The constructive outlook is reinforced by the fact that oscillators on the daily chart are holding in the positive territory and are still far from being in the overbought zone.

Hence, a subsequent strength back towards testing the overnight swing high, around the 1.2440-1.2445 region, looks like a distinct possibility. The momentum could get extended further towards the top end of the aforementioned trend channel, currently pegged around the 1.2500 psychological mark. Some follow-through buying will mark a fresh bullish breakout and set the stage for an extension of the ongoing positive momentum.

On the flip side, the daily swing low, around the 1.2340 area, now seems to protect the immediate downside ahead of the 1.2300 mark. Any further decline might continue to attract some buyers near the 1.2250-1.2245 region. This, in turn, should help limit the downside near the weekly low, around the 1.2200 round figure. Failure to defend the said support levels will negate the positive outlook and shift the bias in favour of bearish traders.

GBP/USD daily chart

Key levels to watch