Two trades to watch: GBP/USD, EUR/USD

GBP/USD looks to BoE rate decision after an upbeat Fed

After two days of gains GBP/USD is trading a few ticks lower ahead of the BoE rate announcement.

The BoE will be making its interest rate decision to a backdrop of decade high inflation, strong jobs report and rising concerns over Omicron, which saw the UK record 78,000 new COVID cases yesterday.

Concerns that the new strain of the virus could prompt more lockdowns, impacting the UK economy could see the BoE hold steady on interest rates.

However, the BoE could take a leaf out of the Fed’s book and adopt a more upbeat, hawkish approach.

Given that the broad expectations are that the BoE will push back until February, a rate hike today could see a big jump in the pound.

The Fed announced a faster pace to asset purchase paving the way for 3 interest hikes next year and 3 more in 2023. The hawkish Fed was already priced in and the US Dollar fell back post announcement.

Learn more about the BoE

Where next GBP/USD?

GBP/USD has extended its rise from 1.3160. The retaking of the 50sma, the falling trendline resistance and the bullish RSI are keeping the buyers optimistic of more upside.

Buyers will need to retake strong resistance at around the 1.3275-1.3282 zone the weekly high, which could prompt a move back over the falling trendline support turned resistance dating back to early August. Above here, the near term down trend is negated.

On the downside 1.3224, the 50 sma and the falling trendline support is a key level. A break below here could see the pair target 1.3170 the weekly low.

Will the ECB announce the end of PEPP?

The ECB is also due to make its monetary policy announcement too. No changes to the interest rate are expected.

The ECB could announce the end of the PEPP bond purchases will be in March in a step towards normalisation. However, the ECB could also raise APP bond purchases to soften the blow.

Updated macro projection are expected, with the ECB still expected to insist that inflation is temporary, although the move by the Fed could add pressure to the central bank.

Learn more about the ECB

Where next for EUR/USD?

After a false break out to the downside, from its symmetrical triangle on the 4 hour chart EUR/USD, the price has pushed higher retaking its 50 sma and testing the falling resistance upper band of the triangle.

A break out her could see EUR/USD rise to 1.1325 the weekly high, ahead of 1.3560 the December high and 1.3287 the late November high.

Failure to break above the falling trendline could see the price fall back to the rising trendline support at 1.1260. A fall below here could open the door to 1.1225 ahead of the year to date low of 1.1190.

How to trade with FOREX.com

Follow these easy steps to start trading with FOREX.com today:

Open a Forex.com account, or log-in if you’re already a customer.
Search for the market you want to trade in our award-winning platform.
Choose your position and size, and your stop and limit levels.
Place the trade.

StoneX Financial Ltd (trading as "FOREX.com") is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, FOREX.com does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date.

This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it. No opinion given in this material constitutes a recommendation by FOREX.com or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although FOREX.com is not specifically prevented from dealing before providing this material, FOREX.com does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Financial Ltd. StoneX Financial Ltd is a company incorporated in England and Wales with UK Companies House number 05616586 and with its registered office at 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is authorised and regulated by the Financial Conduct Authority in the UK, with FCA Register Number: 446717.

FOREX.com is a trademark of StoneX Financial Ltd . This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy. FOREX.com products and services are not intended for Belgium residents.