GBPUSD Technical Analysis – Bulls Need to Reclaim 1.4000 Level

The British pound has started to advance above the 1.3900 level against the US dollar currency following the end of the FOMC policy meeting, which appears to show a slightly dovish bias amongst FED members.

Sterling rose Federal Reserve kept interest rates on hold near zero, saying that inflation largely reflected factors that would pass in time, amidst concerns that rising prices could cause a misstep amongst the Fed.

Typically, rising inflation would cause the FED to push up interest rates and increasing the cost of borrowing for businesses and consumers. The greenback also remained pressured as the US central bank said that while jobs growth and the economy had strengthened, “risks to the economic outlook remain”.

Sterling bulls have the upper hand for now and look to be targeting the 1.4000 handles in the near term, however, risk-off sentiment could cause a pullback at any time. Yesterday the FOMC said will continue to monitor economic progress before easing pandemic support, while effectively gives a nod to more QE if the pandemic progresses.

I suspect sterling is headed higher as the greenback takes a breather, with sterling likely to trade in a range between the 1.3800 to 1.4100 region until the economic picture becomes clear in regard to inflation and COVID-19.

According to the ActivTrader Market Sentiment tool shows that some 68 percent of traders now have a bearish bias towards the GBUSD pair. The bearish sentiment skew is still effectively warning about further losses as shorts get squeezed hard.