Fed Cuts as Expected: GBPUSD Back in Bull Trend?

Summary:

Following the Fed's rate cut at the December FOMC, GBPUSD's downside appears capped. Traders now await Thursday's US initial-jobless-claims print.

Sell GBPUSD

EXP

Trading

1.33605

ENTRY

1.29000

TGT

1.35000

1.33642 -0.00065 -0.05%

Point

Flat

1.29000

TGT

CLOSING

1.33605

ENTRY

1.35000

Fundamentals

BoE rate-cut expectations are weighing on GBPUSD. With CPI momentum easing, the market now prices an about 88% probability of a 25 bp reduction next week.

Meanwhile, Chancellor Rachel Reeves on 10 Dec condemned the pre-budget leak of key tax measures as "damaging". An 13 Nov FT report that she would shelve a planned income-tax rise moved Gilt yields sharply higher. Testifying to the Treasury Select Committee, Reeves said the disclosure was not from an authorised briefing and called the story "partial and inaccurate". Opposition MPs accuse her of talking down the economy to justify tax rises needed to fund higher welfare spending pledged by the Labour party. Reeves rejected claims she misrepresented the OBR's downward revision to productivity, noting that while higher inflation boosts nominal receipts, it erodes the real purchasing power of those revenues.

Early Thursday, the FOMC cut the target range by 25 bp to 3.50%-3.75%, in line with consensus. The DXY sold off on the release, sending GBPUSD to the 1.3390 handle. This marks the third 2024 easing, adopted 9–3.

Dissent split two-ways: two voters favored holding the rate, one preferred a 50 bp cut, exposing a sharp internal divide on the outlook and policy path.

The post-meeting statement notes that activity is "expanding at a solid pace" but concedes job gains have slowed and the unemployment rate has moved higher. At the same time, the prior characterization of the labor market as "strong" or the jobless rate as "low" was dropped. Inflation has eased from its early-year highs but remains "somewhat elevated." Uncertainty around the outlook has risen, with downside risks to employment having increased.

To keep reserve balances ample, the FOMC announced a short-dated Treasury purchase program, set to begin 12 Dec at an initial pace of around $40 bn. The Committee reiterated that any future adjustments will be data-dependent, conditional on the evolving outlook and balance of risks, with no preset course.

At the post-meeting press conference, Chair Powell elaborated that the 175 bp of cuts since September have brought the policy rate into the broad neutral range, giving the FOMC a "watch-and-see" vantage point. He stressed that "rate hikes are in no one's baseline," dispelling fears of an imminent policy reversal.

Technical Analysis

On the 4-hour chart, GBPUSD has printed a record high, yet the MACD histogram is shrinking and RSI peaks are successively lower, which is a classic bearish divergence that flags a correction. Bollinger bands are widening with price riding the upper band. the SMA stack is fanning upward, so the macro up-trend remains intact. Immediate resistance sits at the psychological 1.40 handle and the prior swing-high at 1.347. RSI reads 63, still in bullish territory, favouring buy-the-dip tactics.

On the weekly chart, price is compressing beneath the Bollinger mid-line. The MACD fast-slow lines has retreat to the zero-axis but has not yet crossed bullish. A golden-cross there would open a high-probability move toward the upper Bollinger band and the previous high. Failure would send price back to the EMA200. RSI is 54 and rolling over, signalling neutral-to-cautious sentiment. Strategy. Therefore, traders are advised to look for a short-term fade lower, then flip long on confirmation.

Fed Cuts as Expected: GBPUSD Back in Bull Trend?_1

Fed Cuts as Expected: GBPUSD Back in Bull Trend?_2

Trade Recommendations

Trade Direction: Sell

Entry Price: 1.337

Target Price: 1.29

Stop Loss: 1.35

Support: 1.3/1.29/1.28

Resistance Levels: 1.34/1.342/1.35

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Tank

Analysts

20 years of trading experience, specializing in naked price action analysis, Elliott Wave Theory, and Chan Theory. Has conducted in-depth research on forex, stocks, and cryptocurrencies. Achieved a tenfold profit during the 2005 bull market and doubled profits within one month of entering the crypto market in 2015. Adheres to the trading philosophy: "Trend is king; focus on the big picture, act on

Rank

Articless

391

Win Rate

68.99%

P/L Ratio

0.49

Focus on

XAUUSD, USDJPY

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