GBPUSD has been slowly trending higher, moving inside a rising wedge pattern visible on its 4-hour time frame. Price is currently testing the wedge support and might be due for a bounce back to the top.
Stochastic and RSI are both moving out of the oversold region, indicating a return in buying pressure. This could take GBPUSD up to the wedge resistance at the 1.5250 minor psychological level or possibly an upside breakout.
If price breaks past the wedge resistance, the pair could rally by an additional 300 pips or the same height as the chart formation. The 100 SMA lines up with the bottom of the wedge, adding more support, and is above the 200 SMA and indicating that the path of least resistance is to the upside.
Event risks for this trade setup include the FOMC statement, during which the Fed is widely expected to hike interest rates. Still, the announcement could be accompanied by cautious rhetoric, which might still leave the dollar weaker against its peers.
Another potential catalyst is the UK jobs report, which might show a 0.9K rise in claimants, enough to keep the unemployment rate steady at 5.3%. The average earnings index might fall from 3.0% to 2.5% to indicate weak wage pressures, likely weighing on the pound.
If so, GBPUSD could break below the wedge support around 1.5100-1.5150, taking it lower by an additional 300 pips to the 1.4800 levels.