GBP/USD: bulls still underwater beneath the 50-hr SMA post Fed

• GBP/USD correction gaining traction post-Fed, where next?
• GBP/USD: traders now await the outcome of UK services PMI Thursday.

GBP/USD is up aggressively on a weaker dollar and US yields after a pretty monotonous outcome from the FOMC two day meeting and interest rate decision from the Fed. Currently, GBP/USD is trading at 1.3627, up 0.23% on the day, having posted a daily high at 1.3668 and low at 1.3580.

US 10's slipped to a session low between the range of 2.96-2.99% on a mixed take on the changes in the Fed's statement. The dollar subsequently also fell from 92.6800  to the midpoint of its range of between 92.2230-92.7180.

Take on Fed's statement 

The statement shows the Fed is noting the weaknesses in the economy while remaining confident that inflation will rise to their target or above. The markets, however, were disappointed that there was no nod to a June hike and that has hurt the dollar. 

"The Fed left monetary policy unchanged with the likely path for rate hikes remaining “gradual”. Nonetheless, with activity rising moderately and inflation having “moved close” to 2%, the US looks set for a June rate hike," analysts at ING argued, adding, "the accompanying statement reports that the economy continues to expand at “a moderate rate”. It acknowledged a slight slowdown in consumer spending, but noted investment continued “to grow strongly” and the jobs market is “strong”.Meanwhile, inflation measures have “moved close to 2 percent” with an emphasis placed once again on the fact the inflation target is “symmetric”. Consequently, the Fed is of the view that economic risks remain “roughly balanced” and that conditions will evolve in a manner that warrants ongoing “gradual increases in the federal funds rate”.

Meanwhile, sterling is problems of its own and that being an unwinding of expectations a rate hike fro the BoE on the 10th of May. UK data of late has been poor and this week's PMIs have been under big scrutiny. Today's construction outcome was an improvement but tomorrow's services PMI is likely to garner more attention from the market.

GBP/USD levels

The pound remains below the descending 50-hr SMA at 1.3667 and triple hourly top at 1.3665, and indeed the correction from 1.3580 lows is shallow with spot tradng at 1.3627. However,  the squeeze higher from the low has delivered some positive price signals to the intraday chart (bullish outside range on the 6-hour chart) which may underpin the market somewhat around the low in the short run, as analysts at Scotiabank argued:  "Upside potential is perhaps limited to short-term trend resistance at 1.3685 but think gains towards the 1.3715 breakdown point on the daily chart are liable to attract selling interest now."