The GBP/USD pair is finding it difficult to sustain a recovery that began two days ago near the 1.2975 area, a level that marks a nearly two-month low reached last Thursday. As the new week commences, the pair trades just below the mid-1.3000s, appearing vulnerable to a continued pullback from the 1.3435 region, which represents the highest point since March 2022.
The U.S. Dollar (USD) is attracting dip-buyers as the week begins, recovering some of Friday’s losses amid expectations that the Federal Reserve will implement modest rate cuts over the next year. Conversely, the British Pound (GBP) faces headwinds from increasing speculation about potential interest rate cuts by the Bank of England (BoE) in November and December, contributing to a negative outlook for the GBP/USD pair.
Technical Analysis: Bearish Signals for GBP/USD
From a technical standpoint, the recent decline below the 50-day Simple Moving Average (SMA) and the breach of the 50% Fibonacci retracement level of the August-September rally have triggered bearish sentiment. Daily chart oscillators remain in negative territory and have not yet approached oversold conditions, suggesting that the path of least resistance for GBP/USD is likely downward.
Further weakness below the psychological 1.3000 level appears plausible, with potential support testing in the 1.2960-1.2955 range. This confluence support area consists of the 100-day SMA and the 61.8% Fibonacci level. A breakdown below this support could pave the way for a decline toward the 1.2900 mark, en route to the horizontal support level at 1.2860.
Resistance Levels and Recovery Potential
On the upside, any recovery attempts beyond the 1.3100 mark are expected to face resistance near the 1.3135 region, coinciding with the 38.2% Fibonacci retracement level and the 50-day SMA. This resistance zone is critical; a sustained move above it may shift the bias in favor of bullish traders, enabling the GBP/USD pair to reclaim the 1.3200 level and potentially extend gains toward the 1.3250 mark, which represents a significant horizontal support breakpoint.
As traders navigate this volatile landscape, the focus will remain on central bank communications and economic data that could impact the GBP/USD dynamics in the coming days.
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