The GBP/USD pair is consolidating in a range below the mid-1.2500s during the Asian session on Tuesday, remaining near its lowest level since May, touched last week. Both the fundamental and technical outlooks suggest the path of least resistance for the pair remains downward.
The US Dollar (USD) continues to hold firm near a two-year high, bolstered by the Federal Reserve’s hawkish stance signaling a slower pace of interest rate cuts in 2025. In contrast, the British Pound (GBP) is under pressure due to the Bank of England’s (BoE) decision to leave interest rates unchanged with a split vote and its dovish outlook. This divergence in central bank policies strengthens the bearish case for the GBP/USD pair in the near term.
Technical Outlook: Bearish Bias Persists for GBP/USD
From a technical perspective, repeated failures near the 200-period Simple Moving Average (SMA) on the 4-hour chart, combined with a lack of significant buying interest, reinforce the bearish sentiment. Daily chart oscillators remain deep in negative territory, suggesting further downside potential for GBP/USD.
The pair is likely to test the 1.2500 psychological mark, with a potential breakdown opening the door for deeper losses. If the selling pressure persists, the GBP/USD could fall toward the May swing low around 1.2445, potentially extending toward the 1.2400 level and even the year-to-date low near 1.2300. The latter level should act as a strong support base, limiting further declines, especially in light of lower trading volumes toward the year-end.
Resistance Levels and Potential for Short-Covering
On the upside, the immediate resistance is at the 1.2600 level. A break above this could trigger short-covering, pushing the GBP/USD pair toward the 200-period SMA near 1.2680, followed by the 1.2700 level. A decisive move past 1.2700 would pave the way for a more substantial recovery, targeting the 1.2735 zone, and potentially reaching the 1.2775-1.2780 supply zone.
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