The GBP/USD pair maintained a negative trajectory for a second consecutive day on Friday, though it managed to hold above the previous day’s low, trading around the mid-1.2700s. Despite this, the pair is set to record modest weekly gains amidst subdued US Dollar (USD) activity.
The Federal Reserve’s (Fed) hawkish stance has bolstered the USD, compounded by fresh selling pressure on the Japanese Yen (JPY) following the Bank of Japan‘s (BoJ) recent decision to maintain its current policy stance. However, hopes for a potential Fed rate cut in September, fueled by signs of easing inflation in the US, are likely to limit USD gains and provide support to GBP/USD.
Technically, repeated failures to sustain above the 1.2800 level suggest caution for GBP/USD bulls ahead of the upcoming UK national election on July 4th. Mixed signals from oscillators on the daily chart suggest a prudent approach, awaiting clear confirmation of the recent rally’s sustainability since touching year-to-date lows in April.
In terms of support levels, a decline below the 1.2755-1.2750 zone could lead GBP/USD towards 1.2715-1.2710, with potential further downside to 1.2690-1.2685 and the 100-day Simple Moving Average near 1.2640-1.2635. A decisive break below this level would signal a bearish trend continuation.
Conversely, sustained strength above 1.2800 is needed for bullish momentum, targeting levels around 1.2860 and possibly higher towards the year-to-date peak near 1.2900, with subsequent resistance at 1.2950 and the psychological barrier of 1.3000.
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