GBP/USD waits for a green light from the Fed to rally

GBP/USD has been retreating as the US dollar gains some ground. But as sterling exits overbought conditions, cable is ready to rally with some Fed fuel, FXStreet’s Analyst Yohay Elam briefs.

Britain's progress against the virus and Fed's dovishness to push cable to higher ground

“Later on Wednesday, the Fed publishes its meeting minutes from the latest decision back in April – and it will likely show that the voices calling for tapering bond-buying remain far and few between. The document may convince investors that the current pace of dollar printing is set to continue for longer, devaluing the currency and pushing back the timeline for raising rates.”

“Fears about a rapid spread of the COVID-19 variant first found in India seem to have been exaggerated. Overall, coronavirus cases remain depressed and the vaccination campaign continues at full steam.” 

“The Relative Strength Index (RSI) on the four-hour chart has dropped below 70, exiting overbought conditions. Pound/dollar continues benefitting from upside momentum and trades well above the 50, 100 and 200 simple moving averages.”

“The resistance-turned-support is at 1.4150, which capped cable last week. It is followed by 1.41, 1.4075 and 1.4050.” 

“Resistance is at 1.42, which is the daily high and it is followed by 1.4220, May's peak – and then by the all-important 1.4240 level, which is the yearly high.”