**GBP/USD Downside Threat to the Key 1.0989**
*Based on the original analysis by Steve Miley, Forextraders.com*
## Executive Summary
– **GBP/USD has faced renewed downside pressure in recent trading sessions**
– Key technical levels are now coming into focus, particularly the 1.0989 region
– Market participants are wary of the potential for further declines amid persistent macro and geopolitical headwinds
– This article explores the fundamental backdrop, technical picture, and critical price points for traders in the GBP/USD currency pair
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## Fundamental Backdrop Driving GBP/USD
The GBP/USD currency pair, often referred to as “cable,” has come under significant selling pressure in recent weeks. Several factors have converged to put downside risk in focus:
– **UK Economic Challenges**
– The UK economy continues to grapple with high inflation, sluggish growth prospects, and structural uncertainties post-Brexit.
– The Bank of England (BoE) has turned cautious, with forward guidance emphasizing downside economic risks and potential headwinds for household consumption and investment.
– GDP growth remains anemic, while wage growth is not keeping pace with inflation, squeezing real incomes and consumer spending.
– **US Dollar Resilience**
– The US Federal Reserve remains hawkish relative to most major central banks, underpinned by robust US labor market data and sticky inflation.
– Incoming data have repeatedly surprised to the upside, encouraging the Fed to maintain a higher-for-longer interest rate stance.
– The US Dollar Index (DXY) remains elevated as investors seek safe havens amid global uncertainty.
– **Global Risk Sentiment**
– Rising geopolitical tensions and persistently high energy prices have kept markets defensive, further supporting the US dollar.
– Market volatility remains elevated, leading to “risk-off” flows that disproportionately benefit the USD versus the GBP.
The confluence of these macroeconomic and market drivers sets the stage for the current technical outlook, with the GBP/USD pair at risk of further declines.
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## Technical Analysis: Spotlight on 1.0989
Technical analysis reveals additional warning signs for the GBP/USD, with key support zones now under immediate threat. Price action over the past several days shows a clear struggle to maintain upside momentum, as rallies have stalled and selling has re-emerged.
### Key Technical Patterns and Indicators
– **Recent Price Movements**
– GBP/USD rose to a local high near 1.1495 before succumbing to renewed selling pressure.
– The pair has since retreated, closing below the psychological 1.1200 and 1.1100 thresholds.
– **Downtrend Resumption**
– The failed attempt to break and sustain above resistance at 1.1400, followed by fresh lows, signals a potential resumption of the downtrend.
– Bearish momentum is reinforced by negative readings in key momentum indicators such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD).
– **Support and Resistance Levels**
– Immediate support is identified at 1.1050, which functioned as a recent swing low.
– The next critical support is at 1.0989. A break below this level could pave the way for further declines to 1.0900 and potentially towards 1.0800 in the medium term.
– On the upside, initial resistance emerges at 1.1120, with further resistance at 1.1200 and 1.1270 (former highs).
#### Key Support and Resistance Levels
– Support: 1.1050, 1.0989, 1.0900, 1.0800
– Resistance: 1.1120, 1.1200, 1.1270, 1.1400
### Chart Patterns
GBP/USD’s price action has formed a series of lower highs and lower lows, a classic technical hallmark of a
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