Below 1.3300s: GBP/USD price forecast hinges on H4 200-SMA as traders appear hesitant

Dip-buying supports GBP/USD, but USD strength limits gains.
Elevated US CPI and the prospect of an outsized December Fed rate rise underpin the dollar.
With the BoE leaning hawkish, support for GBP calls for caution among bearish traders.

Beyond mid-1.3300s, GBP/USD struggles to extend its modest Asian-session rise. The pair nevertheless remains above the one-and-a-half-week low reached the day before.

A 50-basis-point (bps) December rate rise by the US Federal Reserve (Fed) remains a possibility. This helps the US Dollar (USD) retain gains made after the previous day's strong US consumer inflation data. Prospects for US-Iran diplomacy, however, limit further advances in the safe-haven currency. A hawkish policy outlook from the Bank of England (BoE) also supports GBP/USD.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

On the 4-hour chart, the 200-period Simple Moving Average (SMA) has held as support. Trading above several Fibonacci retracement levels leaves the near-term technical bias mildly positive. This configuration points to underlying buying interest following the recent retreat from the 1.3506 swing high. Muted momentum readings, however, suggest GBP/USD bulls should remain cautious.

Near 38, the Relative Strength Index signals limited buying conviction. The Moving Average Convergence Divergence (MACD) is also marginally negative and levelling off, suggesting any advance could be gradual. The first resistance level is the 38.2% Fibonacci retracement at 1.3365. Above that lies the 23.6% retracement at 1.3419, with the 1.3506 swing high still the main upside target.

At 1.3322, the 50.0% retracement provides the nearest downside support, followed by the 200-period SMA at 1.3314. A decisive breach of these levels would bring lower Fibonacci supports at 1.3279 and 1.3217 into view. Further down, 1.3138 serves as a structural floor.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

4-hour GBP/USD chart

Fed: Key Questions

Federal Reserve: Its Mandate and US Dollar Impact

Price stability and full employment are the Federal Reserve's (Fed) two mandates. As the institution responsible for US monetary policy, it relies primarily on interest-rate adjustments to meet these objectives. If prices climb too rapidly and inflation exceeds the Fed's 2% target, the central bank raises rates. Higher borrowing costs across the economy make the US more attractive to international investors, strengthening the US Dollar (USD). By contrast, inflation below 2% or an excessively high Unemployment Rate may prompt the Fed to cut rates. This encourages borrowing but puts pressure on the dollar.

Eight Meetings a Year: The Fed's Policy Schedule

Eight times a year, the Federal Reserve (Fed) convenes policy meetings at which the Federal Open Market Committee (FOMC) reviews economic conditions and decides monetary policy. Twelve Fed officials participate in the FOMC: all seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four presidents drawn from the other eleven regional Reserve Banks. Those four serve rotating one-year terms.

Quantitative Easing (QE): How It Affects USD

To substantially expand the supply of credit when the financial system is stalled, the Federal Reserve may turn to Quantitative Easing (QE) in extreme circumstances. This unconventional policy is used in crises or periods of exceptionally low inflation. During the Great Financial Crisis in 2008, it was the Fed's preferred tool. The central bank creates more Dollars to purchase high-grade bonds from financial institutions. The US Dollar typically weakens under QE.

Quantitative Tightening (QT): Implications for the US Dollar

Reversing QE, Quantitative Tightening (QT) entails the Federal Reserve halting bond purchases from financial institutions. It also allows its existing bond holdings to mature without reinvesting the principal in new bonds. The process generally supports the US Dollar's value.