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The British pound (GBP/USD) continues to trade under pressure near 1.3140, with technical indicators suggesting that bearish momentum could deepen if support levels fail to hold. As traders brace for key inflation data and Bank of England rhetoric, the pair is flirting with a breakdown — or a potential reversal setup for brave contrarians.
Technical Outlook: Downtrend Still in Play
The daily chart for the pair shows clear signs of fatigue following months of choppy sideways movement and a recent sharp correction from the 1.38 highs earlier this year.
- The 15-day and 20-day moving averages are both sloping downward, confirming that short-term trend pressure remains bearish.
- The pair is currently trading below both moving averages, reinforcing the idea that rallies are likely to face selling pressure.
- The Relative Strength Index (RSI) sits near 38.6, indicating bearish momentum, but not yet oversold — meaning more downside could be on the table before buyers step in.
This technical structure suggests the market is in a controlled downtrend, with the next direction likely defined by how the pair behaves near the 1.3100 psychological level.
Macro Setup: Diverging Policy Paths Drive the Narrative
The recent slide in the pair reflects a widening policy gap between the Federal Reserve and the Bank of England.
While U.S. data continues to support the idea of “higher for longer” interest rates, the BoE is facing mounting pressure from a slowing U.K. economy and softening inflation expectations.
That’s a toxic mix for sterling, which tends to weaken when growth fears rise and the Fed holds firm.
Meanwhile, strong U.S. Treasury yields continue to boost the dollar, keeping the pound on the defensive.
Key Technical Levels to Watch
|
Level |
Significance |
|
1.3100 |
Immediate support / psychological pivot |
|
1.3000 |
Key support zone; potential breakdown area |
|
1.3180–1.3230 |
Resistance zone (MA cluster) |
|
1.3350 |
Major resistance — breakout confirmation level |
If the pair fails to hold above 1.3100, bears may gain confidence for a deeper move toward 1.3000 or even 1.2850.
Conversely, a strong close above 1.3230 could signal that the correction is losing steam and open the door for a rebound back toward 1.3350.
Sentiment Check: Bears Tighten Their Grip
Retail trader positioning shows a growing number of short-term traders trying to “catch the bottom”, but with little success so far.
Institutional sentiment, meanwhile, remains bearish, with most flows favouring the US dollar over cyclical currencies like the pound.
Until a clear reversal pattern emerges — such as a bullish divergence in RSI or a strong close above the moving averages — the path of least resistance remains downward.
Takeaway
The pair is at a critical juncture.
Technicals remain bearish, fundamentals favour the dollar, and sentiment is leaning risk-off.
A sustained move below 1.3100 could open the floodgates toward 1.3000, while bulls will need a close above 1.3230 to prove they’re back in control.
For now, the market looks like it’s selling rallies, not buying dips.