GBP/USD rebounded on Monday, ending a three-day losing streak that saw the pair drop towards the 1.2600 level last week. The recovery was modest, with the pair climbing by just over half a percent, moving back toward the 1.2700 range. Despite the bounce, sentiment remains cautious as traders await key data releases and central bank decisions this week.
UK Data and Fed Decision Weigh on GBP/USD Sentiment
UK Services PMI data for December showed a downturn, hitting an 11-month low, but a stronger-than-expected Manufacturing PMI component offered some support for the GBP. Focus now shifts to Tuesday’s UK wages and labor data, with expectations for the quarterly Average Earnings to rise by 5% year-on-year.
In the US, December PMI data presented a mixed picture, with Services PMI reaching multi-year highs but Manufacturing PMI falling below 50, indicating contraction. Retail Sales figures are set to be released on Tuesday, but attention is firmly on the Federal Reserve’s decision on Wednesday, where a 25 basis point rate cut is fully priced in, according to the CME FedWatch Tool. Traders will closely monitor the Fed’s updated Summary of Economic Projections (SEP) for guidance on future policy direction.
In addition, GBP/USD traders are preparing for the UK Consumer Price Index (CPI) inflation update on Wednesday, with the BoE’s interest rate decision set for Thursday. The Bank of England is expected to keep rates unchanged, though there is speculation around a dissenting vote in favor of further rate cuts.
GBP/USD Price Forecast: Bearish Trend Persists
The daily chart for GBP/USD shows that the pair remains in a broader bearish trend, with price action consistently capped below both the 50-day Exponential Moving Average (EMA) at 1.2802 and the 200-day EMA at 1.2820. These downward-sloping moving averages continue to reinforce the bearish sentiment, indicating that selling pressure remains dominant.
The latest candlestick reflects a modest rebound, though the pair is struggling to maintain upward momentum beyond the 1.2700 resistance zone. This suggests indecision in the market, with the potential for further downside pressure if sellers regain control. A move toward the 1.2600 support zone could be on the cards if the bearish trend resumes.
On the other hand, a sustained break above the 50-day EMA at 1.2802 could shift the bias towards the upside, bringing the 1.2820 region into focus as the next key resistance area. Until then, GBP/USD remains vulnerable to downside risks, with the outlook largely dependent on the upcoming central bank decisions and economic data releases.
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