**FxWirePro: GBP/USD Inches Higher but Bearish Sentiment Remains Intact**
*By FxWirePro Analyst Team, originally published at EconoTimes*
**Introduction**
The GBP/USD currency pair, often referred to as ‘Cable’, has experienced a modest uptick from recent lows. However, underlying sentiment towards the pair remains distinctly bearish, with both technical and fundamental factors aligning to suggest that downside risks continue to outweigh upside potential. While the pound has shown some resilience in the face of broad-based US dollar strength, traders remain cautious and the near-term outlook appears to favor sellers.
**Recent Price Action**
GBP/USD has managed to post mild gains, recovering slightly from multi-week troughs. The pair found bids near the 1.2700 psychological level before drifting higher, consolidating within a constrained range amid mixed macroeconomic signals and shifting risk appetite. The recovery can largely be attributed to:
– A pullback in the US dollar following weaker economic data from the United States
– A temporary reduction in geopolitical tensions
– Some technical buying after the pound hit oversold conditions
Despite these factors supporting the pound’s crawl upwards, market participants remain wary of calling a bottom, preferring instead to wait for more robust evidence of a trend reversal.
**Macro Fundamentals Driving GBP/USD**
The currency pair’s recent behaviour is the result of a complex interplay of economic releases, policy commentary, and global risk trends. Several fundamental factors continue to undermine confidence in the pound over the medium-term horizon:
– **US Economic Data:** The US dollar has generally benefited from stronger-than-expected job creation, sticky inflation readings, and solid consumer spending data, which have prompted markets to scale back expectations for aggressive Federal Reserve rate cuts in 2024.
– **Federal Reserve Policy:** Hawkish rhetoric from Fed officials has reinforced the notion that US interest rates may remain higher for longer. Multiple FOMC members have suggested a cautious approach to monetary easing, prioritizing inflation control over supporting growth.
– **UK Economic Weakness:** In contrast, the UK economy has shown persistent sluggishness. GDP growth remains tepid, with recent data highlighting stagnation in both manufacturing and services. The Bank of England has signalled preparedness to cut rates if inflation continues to trend lower and if the labor market shows sustained slack.
– **Interest Rate Differentials:** The probability of earlier and potentially deeper easing by the Bank of England compared to the Federal Reserve has rekindled bearish positioning in GBP/USD, as the attractive yield differential for holding US dollars persists.
**Technical Analysis**
Examining price charts and key technical indicators reveals that, while GBP/USD has staged a limited corrective reversal, it remains confined below important resistance levels and within a well-defined downtrend.
– **Daily Chart Trends:** The pair continues to trade below both its 50-day and 100-day moving averages. These averages now act as overhead resistance, with the 1.2800 and 1.2850 levels likely to attract sellers if challenged.
– **Relative Strength Index (RSI):** While not yet in oversold territory, the RSI measures have rebounded only modestly, failing to support a more sustained bullish recovery.
– **Support and Resistance Levels:** Immediate support sits at the 1.2670 level, followed by a more significant demand area around 1.2600. On the topside, resistance can be found at 1.2765, with any decisive move above 1.2850 required to shift the current bearish narrative.
– **Bearish Continuation Patterns:** The daily chart displays a series of lower highs and lower lows, highlighting distinct bearish momentum. Unless a strong, catalyst-driven rally materializes, technical selling is expected to re-emerge on minor rallies.
**Key Drivers for GBP/USD Going Forward**
The outlook for the cable pair will be shaped by several interlinked factors over the coming sessions and weeks.
– **Upcoming US Data:** Market attention will focus on US labor
Read more on GBP/USD trading.