GBP/USD Decline Accelerates After Breaching Critical Support

GBP/USD closed sharply lower at 1.3017, marking a significant technical breakdown after falling through critical near-term support levels. The sharp decline reflects intensifying US dollar strength and renewed selling pressure on the pound as market sentiment turns increasingly bearish.

Key Technical Observations

Moving Averages Confirm Downtrend: The 15-day moving average (1.3261) and 20-day moving average (1.3282) are both trending downward with widening separation, signalling strong bearish momentum. Price has extended well below both averages, confirming that sellers remain firmly in control.

Trend Structure: The pair has broken decisively below 1.3100–1.3050, a key demand zone that had previously acted as a floor for several sessions. This breakdown opens the path for further downside toward 1.2850 and possibly 1.2750, representing the next major technical supports.

RSI Momentum: The RSI (14) has dropped to 22.98, placing the pair in deeply oversold territory. While this indicates strong selling momentum, it also suggests the potential for a short-term corrective bounce or consolidation before further declines.

Candlestick Behaviour: The latest candle shows a strong bearish close with little to no lower wick — a sign of conviction among sellers. However, given the RSI’s extreme reading, a temporary pullback toward the 1.3100–1.3150 zone may precede any continuation lower.

Macro & Market Context

US Dollar Strength Dominates: The ongoing rally in the US Dollar Index (DXY) — which is nearing the 100.00 mark — continues to weigh on the pound. The divergence between the Federal Reserve’s hawkish stance and the Bank of England’s cautious policy tone has widened, reinforcing capital flows toward the USD.

UK Economic Outlook: Recent UK data points to slowing growth and easing inflation pressures, increasing the likelihood of the BoE maintaining or even cutting rates in 2025. This macro backdrop erodes the pound’s yield advantage and accelerates selling pressure.

Risk Sentiment: Broader risk aversion amid global uncertainty and geopolitical headwinds has further strengthened the dollar’s safe-haven bid, compounding GBP weakness.

Key Levels to Watch

• Immediate Resistance: 1.3100 – broken support, now a key pivot for potential retest.
• Next Resistance: 1.3260 – aligned with 15-day moving average.
• Immediate Support: 1.2850 – key horizontal zone from prior base.
• Deeper Support: 1.2750 – February swing low and next bearish target.

Bias: Bearish (Oversold Conditions Emerging)

The trend remains decisively bearish as long as the pair trades below 1.3150. Momentum suggests potential continuation toward 1.2850, but RSI extremes imply that a near-term corrective bounce is increasingly likely before the next leg lower.

Key Takeaways

• Favor sell-on-rally setups near 1.3100–1.3150, targeting 1.2850.
• RSI oversold readings warn of a possible short-term bounce — avoid fresh shorts at current levels.
• Maintain stops above 1.3260 to manage reversal risk amid possible corrective retracement.