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GBP/USD Faces Resistance Ahead of FOMC

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On Tuesday, GBP/USD exhibited a bullish surge, rallying to reach the 1.2670 level before relinquishing some of its gains later in the day. Despite the pullback, the pair managed to find stability above the 1.2600 mark. However, the technical outlook suggests that bullish momentum may be waning, with buyers likely to remain cautious unless key resistance levels are surpassed.

At present, the 1.2610-1.2600 range serves as a significant barrier for GBP/USD, with the 50% and 61.8% Fibonacci retracement levels from the previous swing converging in this zone. Additionally, a dynamic trendline formed from the recent bullish rally adds further confluence to this resistance area. Overcoming these hurdles could signal a renewed bullish sentiment, potentially paving the way for further upside movement.

Looking ahead, market participants are eagerly anticipating the release of the Federal Reserve's minutes from the January policy meeting. However, expectations for significant insights into the Fed's rate outlook are muted. The meeting predates the release of key economic data, including the robust January jobs report and inflation figures, which led to a reassessment of rate cut probabilities for May. Consequently, the minutes may not provide fresh guidance on the central bank's future policy direction.

Against this backdrop, market sentiment remains uncertain, with risk aversion evident in the performance of global equities. The UK's FTSE 100 Index opened lower on Wednesday, reflecting a cautious stance among investors. Similarly, US stock index futures are trending downwards during European trading hours. If this risk-averse mood persists, GBP/USD could face renewed downward pressure.

As investors await the FOMC meeting later in the day, speculation abounds regarding potential market reactions. While the technical analysis hints at the possibility of a bullish impulse, the broader market sentiment and any hints from Fed policymakers will likely dictate GBP/USD's near-term trajectory.

In conclusion, GBP/USD finds itself at a critical juncture amidst uncertain market dynamics and anticipation of the FOMC meeting. Traders are advised to closely monitor key resistance levels and market sentiment for clues regarding the pair's next move.