GBP/USD fails to hold above the 20-day SMA, eyes on BoE and Fed

• The Cable slightly retreated and closed Tuesday with 0.15% losses at 1.2150.
• Markets aren’t discounting rate hikes for this week’s BoE and Fed meetings.
• Focus will be set on both bank's statements and their Chairman’s pressers.
• The BoE will release a fresh macro forecast.

In Tuesday’s session, the GBP/USD traded in the 1.2120 - 1.2200 range, closing with mild losses around 1.2150. On the USD side, it gained momentum with the DXY Index, advancing to 106.70, mainly driven by a cautious market mood. In that sense, as the economic calendar was empty with no relevant reports released by the US or the UK, the Greenback’s strength explained the pair’s trajectory.

On the Federal Reserve’s (Fed) side, investors await more clues on the bank’s stance, specifically on how they are assessing the recent robust economic reports and how they would impact their policy stance as they may give the officials reasoning to continue hiking. That being said, since the September meeting, inflation and job creation have decelerated, which would favour the case of the Fed finishing its tightening cycle with no hikes in the remainder of 2023. Markets have already discounted a pause for Wednesday's announcement, and the odds of a hike in December are still low but the bank's stance will likely impact the expectations for the last meeting of 2023.

On the Bank of England’s side, investors aren’t foreseeing a hike and will also look for clues for placing their bets for the next meetings on the bank’s statement and on Andrew Bailey’s words. Regarding the forecasts, there are growing expectations that as recent economic activity data came in weak, the bank will revise to the downside growth estimations while inflation projections are expected to be revised to the upside as prices remain stubbornly high.

 
GBP/USD Levels to watch 

Analysing the daily chart, GBP/USD presents a bearish outlook for the short term. Both the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) remain in negative territory, and the pair is below the 20,100 and 200-day Simple Moving Averages (SMAs), which highlights the continued dominance of bears on the broader scale.

 Support levels: 1.2100, 1.2080, 1.2050.

 Resistance levels: 1.2180 (20-day SMA), 1.2200, 1.2250.

GBP/USD Daily Chart