Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3500.
- Add a stop-loss at 1.3250.
- Timeline: 1-2 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3250.
- Add a stop-loss at 1.3500.
The GBP/USD pair rose to the highest since October after the Federal Reserve delivered its final interest rate decision of the year and issued guidance on what to expect in the following year. It jumped to 1.3381, up from last month's low of 1.3000.
Federal Reserve Interest Rate Decision
The GBP/USD pair rose after the Federal Open Market Committee (FOMC) voted 9 to 3 to cut interest rates by 0.25%, bringing the official cash rate to between 3.50% and 3.75%. It was the third consecutive meeting of cuts.
The dot plot, which shows expectations of interest rates in the US, showed that officials anticipate one cut in 2026 and another in 2027. Historically, however, the bank has struggled to maintain the outlook of the dot plot as officials are normally influenced by the latest macro data.
Fed officials expect inflation to come down in 2025, with the median estimate being 2.4%, lower than the current 3.0%, but still higher than the bank's target of 2.0%.
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The other notable aspect of the Fed decision was a plan buy short-term treasuries, a move it hopes will help it maintain an sample supply of reserves. Officials were quick to note that the new purchases will not be quantitative easing.
Looking ahead, the next key catalyst for the pair will be the upcoming US exports and imports data, which will provide more information about the impact of Donald Trump's tariffs on trade.
Analysts polled by Reuters expect the upcoming data to show that the trade deficit widened to $63 billion in September from $59.6 billion in August. In contrast, a report by China’s statistics agency showed that its trade surplus jumped to $1 trillion last month.
GBP/USD Technical Analysis
The GBP/USD pair bottomed at the psychological level at 1.3000 on November 4 to the current 1.3380 as traders anticipated a Federal Reserve interest rate cut. It also rose amid the broader US dollar self-off.
It has now moved above the 50-day Exponential Moving Average (EMA) and the psychological level at 1.3300. It also jumped above the top of the trading range of the Murrey Math Lines tool, and is now nearing the strong pivot reverse level.
The Average Directional Index (ADX), a popular measure of a trend strength, rose to 24, a sign that it is strengthening.
Therefore, the path of the least resistance for the pair is bullish, with the next target being the psychological level at 1.3500. A drop below the support at 1.3200 will invalidate the bullish outlook.
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