GBP/USD corrects above 1.29, Fed decision eyed

The GBP/USD pair eased to a new session low at 1.2885 in the NA session as the US Dollar Index made another attempt to rise above the 99 handle. However, the bearish momentum faded away quickly as the DXY failed to hold above that level and the cable started to recover its losses. As of writing, the pair was trading at 1.2915, losing 0.19%, or 25 pips, on the day.

Earlier in the American session, the market reaction to the ADP private-sector employment report stayed limited as the investors refrained from taking positions ahead of the important FOMC decision. The US Federal Reserve is going to reveal its decision after the two-day meeting at 18:00 GMT today. 

• US: Private Sector Employment Increased by 177,000 Jobs in April - ADP

Most of the experts expect the FOMC to leave the policy rate unchanged while making small adjustments in the press statement. Analysts at Natixis suggest that the Fed is likely to remain on hold at its May 2-3 FOMC meeting with few changes to the wording and no signal for the short term conduct of monetary policy. They also underline the fact that there won't be a press conference nor an update of the summary of economic projections. However, the weak Q1 GDP figures and the contracting PCE price index, Fed's favorite inflation gauge, could potentially cause the Fed to adopt a more cautious tone, putting some selling pressure on the greenback.

• FOMC meeting expected to be largely a non-event – Lloyds Bank
• FOMC: No change in policy expected, but they will want to keep June ‘live’ - SocGen

Technical outlook

With a decisive break above 1.2955/60 (Apr. 28 high/Oct. 4 high) area, the pair could aim for 1.30 (psychological level) ahead of 1.3055 (Sept. 28 high). On the downside, supports align at 1.2900 (psychological level), 1.2840 (Apr. 27 low) and finally 1.2760 (Apr. 21 low).