GBPUSD made a strong bounce during the FOMC statement, as dollar bulls were disappointed to find out that the Fed lowered their growth and inflation forecasts. 

Although the statement no longer contained the “patient” wording in discussing policy normalization, most market participants pushed back their rate hike expectations from June to September.

With that, GBPUSD bounced off its recent lows near the 1.4650 minor psychological level and bounced above 1.5000. It rallied close to the 1.5200 area before retreating and it now seems to be finding resistance at the 38.2% Fibonacci retracement level. If this continues to keep gains in check, price could head back to the previous lows.

However, a pickup in buying pressure might lead to another move past the spike and possibly a breakout above the 61.8% Fibonacci retracement level. This would indicate that a reversal is underway and that GBPUSD might test the next resistance at 1.5500.

Stochastic is moving up, reflecting a buildup in buying pressure, which might be strong enough to push for more price gains. Take note though that the 38.2% Fibonacci level lines up with a broken support zone, which means that plenty of traders are watching that level.

In the UK, data was less upbeat than usual, as the jobs figures simply came in line with expectations. The jobless rate remained unchanged at 5.7% while the BOE minutes weren’t as hawkish as it used to be.

With that, the path of least resistance is to the downside, especially since the shorter-term moving average is trading below the longer-term moving average. In addition, the moving averages are treading farther apart, indicating a strengthening trend.

The 100 EMA might hold as resistance, as it seems to have held as a dynamic inflection point in the past. This is close to the 50% and 32.8% Fibonacci retracement levels, both of which could continue to hold as a ceiling for any rallies.

By Kate Curtis from Trader’s Way