GBP/USD bulls eye a run to 1.22 area while bears look for a break of 1.1963

• GBP/USD sits tight ahead of the Federal Reserve interest rate decision. 
• Technically, the price is on a bullish path with a focus on the 1.22 area, but bears will be motivated by a break of 1.1963 lows. 

At 1.2053, GBP/USD is higher by 0.22% and has climbed from within a range of 1.2016 and 1.2087 on the day so far in the count down to the Federal Reserve interest rate decision.  

The US dollar has been [rushed and pulled this week in the build-up to the Fed outcome, juggled between the bears and bulls depending on risk sentiment. On Tuesday, it benefitted from gas woes in Europe and poor business sentiment from Germany on Monday as well as an overall gloomy outlook for world growth as forecasted by the International Monetary fund. 

However, it is all about the Fed today and DXY has been trading between a low of 106.781 and 107.436 the high so far. Analysts widely expect a further 75-basis-point increase in the federal funds rate which has been priced in by the markets. The focus will be on any forward guidance on the path of monetary policy going forward, particularly in the absence of an updated Summary of Economic Projections. Federal Reserve Chairman Jerome Powell speaks at 2:30 pm ET in the presser. 

Meanwhile, the bond market is already pricing in a looming recession, as seen in the inversion of two- and 10-year Treasury note yields. The short-end of the yield curve has been higher than the long end nearly all month, with the gap widening in the build-up to the Fed. Nevertheless, US stocks on Wall Street are firmer, being led by upbeat earnings and recovering from the negative sentiment surrounding profit warnings from Walmart the prior day. 

Domestically, there has been no UK data but investors are second-guessing the Bank of England's next move when it meets next on August 4. Markets are pricing got The Old Lady to continue its tightening cycle with the possibility of a larger 50-bp increase.

GBP/USD technical analysis

From a daily perspective, the bears will be seeking a break below 1.1963 while the bull's eye a continuation beyond 1.2090 to target the price imbalance between 1.2212 and 1.2238 which aligns with a 78.6% weekly retracement of the weekly bearish impulse: