GBP/USD Forecast: Sterling Sways Higher Facing Resistance At $1.3450

While GBP/USD is trading little changed at around 1.3430 against the US Dollar, the broader picture suggests that it is moving within narrow range sideways.

While struggling around key Fibonacci support of $1.3320 at the beginning of this week, the helping hand for Sterling was actually provided by the US Federal Reserve bank. Fed’s interest rate hike has been widely priced-in, so the foreign exchange market sold US Dollars because of the economic projections. While Fed increased its GDP growth projections, the inflation forecast remained broadly unchanged indicating that future rate increases are fragile. It was the muted inflation outlook that has been the most relevant reason for the US Dollar being heavily sold of FX market.

The Bank of England left the monetary policy and the economic assessment for the UK unchanged on its December meeting, in line with November Inflation Report. From the foreign exchange market point of view, the Bank of England meeting was a non-mover.

Technically the GBP/USD is now moving within range of $1.3320-$1.3450, both being Fibonacci 38.2 percent and 23.6 percent retracement lines of the uptrend starting on August 24 at $1.2770 and peaking on September 20 at $1.3660.

The technical oscillators are pretty neutral with Relative Strength Index on 4-hour chart just above 50 neutral line and pointing downward while Momentum is just above zero pointing upwards. The decisive jump of GBP/USD from $1.3320 key Fibonacci support higher has brought the Slow Stochastics from the Oversold to the Overbought condition within one day only, signaling fragile recovery within current trend higher.

On the upside, the GBP/USD is facing a Fibonacci resistance combined with downtrend resistance line at around $1.3450 that together with Overbought Stochastics indicates move lower.

GBP/USD 4-hour chart