**British Pound Short-Term Outlook: GBP/USD Breaks Range Lows. Can the 200DMA Hold?**
*Adapted from the original analysis by Matt Weller, FOREX.com*
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The British pound (GBP) recently experienced significant technical movement against the US dollar (USD), as the GBP/USD currency pair broke below the lower boundary of its established trading range. With critical technical levels in reach, traders are closely watching for direction as macroeconomic forces and upcoming events may determine whether the pair can find meaningful support, especially around its 200-day moving average (DMA).
This article offers a comprehensive technical breakdown and fundamental overview of GBP/USD’s recent price action. Drawing upon the insights of Matt Weller from FOREX.com, we dissect major levels, analyze contributing factors, and assess key risks facing the pair through the summer.
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### Recent Price Action and Technical Breakdown
Over the past several months, GBP/USD has been locked within a relatively narrow trading range as both the Bank of England (BoE) and the Federal Reserve suggested possible policy shifts. However, the recent downside break of that range signals a possible shift in sentiment and potential acceleration in GBP weakness or USD strength.
Key Technical Points:
– **Range Support Broken**: GBP/USD slipped decisively below the 1.2620–1.2640 area, which had previously served as a strong support foundation for the pair throughout early 2024. The breakdown generated renewed bearish interest in the short term.
– **200-Day Moving Average in Play**: With the pair falling towards the 200DMA, currently near 1.2550, this technical indicator becomes a key level. The 200DMA is often watched as a measure of the broader trend and can act as a crucial line of defense for bulls.
– **Momentum Shift**: The move beneath recent range lows also reflects a momentum shift, as bears could now target additional support levels. The significance of the technical break may draw in further selling pressure from both discretionary traders and algorithmic systems.
**Chart Overview:**
– Immediate support comes at the 200DMA (~1.2550).
– Further downside targets include 1.2500, a psychological round number, and 1.2450, a prior swing low from earlier this year.
– Resistance is now established at former support areas (1.2620–1.2640) and, further above, the 50DMA near 1.2700.
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### Fundamental Drivers Impacting the Pound
Beyond technicals, the sterling’s outlook is shaped by several fundamental themes. The interplay between UK economic recovery, central bank policy divergence, and US macro surprises has proven particularly impactful in recent sessions:
1. **Bank of England Policy Uncertainty**
– Until recently, the BoE had been broadly hawkish, with policymakers warning of sticky inflation and the potential need to keep rates higher for longer. However, softer economic data, especially with cooling headline inflation and lackluster growth, has prompted speculation about rate cuts later in 2024.
– Mixed forward guidance from BoE officials increases volatility around macro events and economic releases.
– Traders are attuned to commentary about the timeline and probability of a first rate cut, as even a shift of one meeting can move GBP pairs.
2. **Divergence with the Federal Reserve**
– The Fed has had to contend with persistently firm US economic data, including a tight labor market and re-accelerating inflation readings. Recent FOMC statements and economic projections suggest the US may delay its first rate cut further into the year compared to peers like the BoE or ECB.
– This divergence has contributed to US dollar strength on numerous fronts and has undercut the relative attractiveness of sterling versus the greenback.
– Any signs of convergence (for example, UK inflation failing to moderate as quickly as expected or a softer US payrolls report) could prompt reversals in GBP/USD.
3. **Macro Event
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