GBP/USD Stabilization: Cable Battles $1.37 as BoE Decision Looms
In the European trading session, GBP/USD tried to stop its decline and settled near $1.3682. With traders cautious...
Quick overview
- GBP/USD is stabilizing around $1.3682 as traders await the Bank of England's policy announcement.
- The Bank of England is expected to maintain interest rates at 3.75%, reflecting a cautious approach after recent rate cuts.
- The US dollar remains weak due to a partial government shutdown, but a hawkish outlook from the Fed may limit further losses for the Pound.
- Technical analysis shows GBP/USD is testing key support levels, with potential buying opportunities if it bounces off $1.3638.
In the European trading session, GBP/USD tried to stop its decline and settled near $1.3682. With traders cautious before the Bank of England’s policy announcement on Thursday, the pair has found some support after falling from four-year highs.
Ongoing weakness in the US dollar, made worse by a partial government shutdown, is helping to limit further losses for the Pound.
BoE Expected to Hold Rates Steady at 3.75%
Most expect the Bank of England to keep interest rates at 3.75%. Unlike earlier divided votes, policymakers are now likely to take a slow and steady approach after December’s 25-point rate cut.
Governor Andrew Bailey’s press conference will be important for updates on inflation, which officials hope will reach the 2% target by mid-2026.
This cautious outlook is keeping the Pound under pressure as investors wait for stronger signs of recovery.
USD Faces Headwinds Amid Shutdown and Policy Shifts
The US dollar is still weak because of uncertainty from the partial government shutdown, which has kept the Dollar Index (DXY) near 97.60.
However, the US dollar’s losses are limited by a more hawkish outlook after Kevin Warsh was nominated as the next Fed Chair.
Warsh’s possible focus on a smaller Fed balance sheet has held back the Pound’s recovery. At the same time, strong US manufacturing data points to a resilient economy.
GBP/USD Technical Analysis: Testing the Fibonacci Floors
GBP/USD is now moving sideways on the 4-hour chart as it pulls back from the high levels seen in January.
- Moving Averages: The pair is above its 50-EMA ($1.3602) and 200-SMA ($1.3518), which shows the long-term uptrend is still in place, even after recent weakness.
- Fibonacci & Trendlines: The price has strong support at the 0.5 Fibonacci level ($1.3637). An upward trendline from late 2025 also offers support near $1.3582.
- RSI Momentum: The RSI is now at 46.28, down from overbought levels above 80. This suggests a more balanced market for both buyers and sellers.
Key Price Levels
- Resistance Ceiling: The first resistance is at $1.3692 (0.382 Fibo) and $1.3759 (0.236 Fibo), with a major long-term barrier at $1.3869.
- Support Floors: Key support levels are at $1.3638 and $1.3582. If the price falls below the 200-SMA at $1.3518, it could mean a deeper bearish move.
Trade Idea: Consider buying if the price bounces off the $1.3638 support, aiming for $1.3820, and set a stop-loss below $1.3580.
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