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Forex News: GBPUSD beats its range. Can buyers start a new leg higher?

May 5, 2022
by Joseph Jeffriess, Market Analyst

Today’s focus is on GBPUSD after its solid rally yesterday, as markets surged to the USD after the FOMC statement suggested the Fed might not be as aggressive in its policy to combat inflation. The message also confirmed that the policy would do its best to help the US economy achieve a softish landing, while Powell commented that inflation remains much too high.

Let’s look at the GBPUSD. Price remains in a long-term downtrend. The last key leg we saw was a sharp down leg as the USD continued to fly higher over the previous week.

Since the last low was put in on the 28th of April, we have seen a range develop, and that pattern was in place until yesterday, before buyers broke through it to the upside after the FMOC. This break has us thinking, can we see a new leg higher set up after this break? Price so far has been weaker today will sellers retracing over 50% of yesterday’s move.

Buyers have been fighting back into today’s European session, and expectations are that the BOE may raise rates again today. Could this continue to give the Cable a boost and send price back up to yesterday’s high? A break and close above yesterday’s high could confirm a new up leg. A close back below the HL is a worry and could suggest that buyer momentum might now be that firm.

If we do see a new close above yesterday’s highs and buyers can continue to hold momentum, we would be looking at the closest trend line as a possible higher target.

Today’s BOE rates decision is at 9:00 pm AEST. Rates are expected to increase to 1%.

GBPUSD D1 Chart

All times are AEST.