The GBP/USD pair rebounded slightly from its Asian session low on Monday, trading near the 1.2400 mark but remaining largely unchanged for the day. Despite the modest recovery, upside momentum remains limited due to renewed US Dollar (USD) strength, keeping bullish traders cautious.
USD Strengthened by Trade War Fears and Solid Economic Data
Investor demand for the safe-haven USD increased following former US President Donald Trump’s latest tariff threats. Expectations that Trump’s protectionist policies could reignite inflation have reinforced market sentiment that the Federal Reserve (Fed) will keep interest rates steady, further supporting the Greenback. Additionally, last Friday’s stronger-than-expected US employment data bolstered confidence in the USD’s resilience.
BoE’s Gloomy Outlook Weighs on Sterling
The Bank of England’s (BoE) cautious stance and concerns over the UK’s economic outlook continue to limit GBP gains. Traders remain wary of the central bank’s next policy move amid weak domestic growth and persistent inflation uncertainties.
Technical Analysis: Downside Risks Persist
From a technical perspective, GBP/USD has repeatedly failed to break above the 50-day Simple Moving Average (SMA), suggesting that the pair’s path of least resistance remains to the downside. Any short-term gains could present selling opportunities, with the 1.2500 psychological level acting as a key resistance point. A decisive break above this level could pave the way for further gains toward 1.2575–1.2580, followed by 1.2600. A sustained move higher may see the pair challenge the 100-day SMA near 1.2715–1.2720.
On the downside, a break below the immediate support at 1.2375–1.2370 could push GBP/USD toward the 1.2300 level, with further losses potentially driving the pair to last week’s swing low in the mid-1.2200s. Continued selling pressure could lead to a test of the next significant support at 1.2175.
Overall, the GBP/USD pair remains vulnerable to downside risks as trade tensions, Fed policy expectations, and the BoE’s cautious outlook weigh on market sentiment.
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