The GBP/USD pair is struggling to maintain the positive momentum from the previous session and is facing rejection near the 100-day Simple Moving Average (SMA) during the Asian session on Friday. At the time of writing, the pair is trading around the 1.2965-1.2960 region, marking a modest 0.15% drop for the day. While the US Dollar (USD) has seen a slight uptick, the downside for the GBP/USD pair appears limited due to the hawkish stance from the Bank of England (BoE).
Bank of England’s Hawkish Stance Supports the Pound
The BoE has warned that the expansive Autumn Budget, introduced by Chancellor Rachel Reeves, could lead to higher inflation, signaling the need for a cautious approach toward rate cuts in 2025. This suggests that the BoE is likely to maintain its hawkish stance in the near term, providing support to the British Pound (GBP) against the US Dollar.
In contrast, Federal Reserve Chair Jerome Powell’s recent comments failed to offer strong guidance on halting rate cuts, keeping the USD under pressure and contributing to a decline in US Treasury yields. This provides some relief for GBP/USD, as a weaker USD limits the downside potential for the pair.
Technical Outlook: Bearish Consolidation Phase
Technically, the GBP/USD pair has been in a range-bound consolidation phase over the past few weeks, following the pullback from the highest level since February 2022. The failure to build on this week’s recovery from a nearly three-month low at 1.2835 further suggests that the path of least resistance for the pair could be to the downside.
The oscillators on the daily chart are also indicating negative momentum, reinforcing the bearish outlook. A sustained break and acceptance below the 1.2900 level would signal further downside, potentially targeting the 200-day SMA at 1.2815, followed by the 1.2800 psychological support level. A break below 1.2800 could open the door for further declines toward 1.2765 and eventually 1.2700. The August monthly swing low near 1.2665 could be the next major support zone in case the bearish trend accelerates.
Bullish Scenario: Need for a Break Above 1.3000
On the flip side, if the GBP/USD pair manages to break above the 100-day SMA and the key psychological level of 1.3000, it would open the door for a more meaningful upward move. A break above 1.3000 could lead the pair toward the 1.3070 supply zone, followed by a potential test of the 1.3100 level. This would suggest that the corrective decline from last month has run its course, shifting the near-term bias in favor of bullish traders.
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