GBP/USD drops back below 1.2300 after Fed statement

The US dollar gained momentum in the currency market after the decision of the Federal Reserve to leave rates unchanged. GBP/USD dropped back below 1.2300 and fell, finding support around 1.2275.

Despite moving away from the 3-week highs that reached earlier at 1.2353, the pair is still up more than 40 pips for the day and headed toward the highest close in two weeks. 

Greenback trimmed losses in the market after the Fed left interest rates on hold and continued to signal that the case for a rate hike has “continued to strengthen”. Two members voted for a rate hike, instead of three, like the September meeting. The outcome of the meeting was in line with expectation. 

GBP/USD levels to watch 

Today the pair traded above 1.2300 and also on top of another relevant resistance that is the 1.2330 level, but it failed to hold on top. Also, the rally was capped by the 20-day moving average that stands at 1.2340. A consolidation significantly above 1.2340 could open the doors for a more sustain recovery. The short-term bias still points to the upside, but cable stopped on Wednesday at a strong resistance area. 

Volatility in the pair could remain elevated taking into account that tomorrow the Bank of England will announce its decision on monetary policy, released the minutes and also the quarterly Inflation Report and that on Friday, the NFP report will be released. Also US politic is having a larger impact every day as election day looms.