The GBP to USD rate has been trading in a range between 1.25 and 1.28 since December, but we might see a bearish break for GBP/USD, after buyers failed to push the price above 1.30. In the last two weeks, we have seen a 3 cent decline in this forex pair as both the FED and the BOE keep giving mixed signals regarding policy easing and now GBP/USD is testing the bottom of the range.

GBP/USD Daily Chart – The 200 SMA Held As Support Yesterday

This forex pair was sliding lower early last week but we saw a strong bounce after the FOMC meeting on Wednesday evening, which sent the price 150 pips higher. However, it reversed on Thursday and suffered some heavy losses in the latter part of the week, declining to a one-month low. However, GBP buyers managed to defend the 200 SMA (purple) yesterday, preventing further downward pressure for now.

This moving average will be the technical indicator to watch, which stands above the first support zone around 1.26. This area represents a critical support level that sellers need to breach to establish a stronger bearish bias. If GBP/USD holds above this level, buyers still have a chance in upcoming sessions, although upside potential may be limited.

The 100 SMA (green) around 1.2650 acts as the first significant resistance level, followed by the 50 SMA (yellow) around 1.2720. Looking ahead, several factors will influence trading sentiment in the pair. Technical factors will remain crucial, alongside the performance of risk trades and developments in the bond market. With a relatively light economic calendar for both the GBP and USD this week, we will closely monitor these factors for cues on the direction of this pair.

Bank of England Makes the First Move Toward Rate Cuts

The Cable fell sharply following the Bank of England (BoE) policy meeting last week. The decrease was precipitated by the disclosure that Catherine Mann, the only remaining member of the board of governors who advocated for interest rate hikes, had shifted her position. With no members now supporting a rate hike, eight backing keeping rates steady, and one arguing for rate cuts, the vote was regarded as a significant reversal in the BoE’s policy stance. This shift was seen as a hint for lower rates, prompting a pessimistic mood for the British pound against the US dollar.

GBP/USD Live Chart