**GBP/USD Downside Threat: Analyzing Pressure on the Key 1.0989 Level**
*Credit: ForexTraders.com – Written by Steve Miley*
## Introduction
The British pound sterling (GBP) has faced significant volatility against the US dollar (USD) over recent trading sessions, with traders closely monitoring the trajectory of the GBP/USD currency pair. In this article, we break down the technical landscape, examine the underlying fundamental drivers, assess near- and medium-term risks, and explore potential price scenarios as the market eyes the pivotal 1.0989 support level. This analysis closely follows the perspectives provided by Steve Miley for ForexTraders.com.
## Technical Analysis Overview
### Recent Price Movements
– GBP/USD has demonstrated considerable weakness over recent weeks, struggling to sustain rebounds and frequently succumbing to renewed pressure from the strengthening US dollar.
– The currency pair’s failure to break convincingly above interim resistance levels has heightened concerns among market participants.
### Key Levels to Watch
– **Support Levels:**
– 1.1000: A psychological round number serving as initial support.
– 1.0989: The key technical support, a breach of which could trigger further selling pressure.
– 1.0925 and 1.0850: Additional support zones that may come into play if downside momentum intensifies.
– **Resistance Levels:**
– 1.1100: Near-term resistance.
– 1.1200 and 1.1300: Significant resistance areas, requiring a notable shift in sentiment for GBP/USD to rally toward these levels.
### Daily Chart Patterns
– GBP/USD continues to trade below its 20-day and 50-day moving averages, reinforcing a bearish undertone.
– Momentum indicators, such as the Relative Strength Index (RSI), remain suppressed and below neutral thresholds, suggesting ongoing downward momentum.
– A sequence of lower highs and lower lows on daily and 4-hour charts confirms the established short-term downtrend.
## Fundamental Drivers
### Divergent Monetary Policies
– The US Federal Reserve’s hawkish monetary policy, highlighted by aggressive interest rate hikes, has underpinned a robust US dollar.
– In contrast, the Bank of England (BoE) faces a delicate balancing act as it fights historically high inflation while remaining wary of recession risks.
– Market expectations suggest the Federal Reserve may continue to outpace the BoE in tightening, further pressuring GBP/USD.
### Economic Data Flow
– US economic releases, particularly non-farm payrolls and inflation data, have consistently surprised to the upside, reinforcing dollar strength.
– UK economic data has been mixed, but signs of economic contraction and sluggish growth persist. Business and consumer confidence surveys indicate ongoing uncertainty.
– Negative growth forecasts for the UK, combined with concerns about the country’s fiscal credibility, have fueled apprehension toward GBP.
### Political and Geopolitical Factors
– Lingering doubts about the UK government’s fiscal plans, including recent mini-budgets and policy reversals, have exacerbated currency volatility.
– Broader geopolitical uncertainties, such as the energy crisis in Europe and global risk aversion, have amplified safe-haven flows into the US dollar, to the detriment of the pound.
## Short-Term Outlook
### Market Sentiment
– Sentiment around GBP/USD remains fragile, with traders wary of unexpected developments from either the Bank of England or the UK government.
– Persistent dollar strength and risk-off market conditions suggest that GBP/USD may struggle to mount any sustainable rallies in the near term.
### Potential Scenarios
– A decisive break below 1.0989 opens the door to further declines, potentially targeting 1.0925 and 1.0850.
– Short-covering rallies could occur if the pair manages to hold above 1.0989, but the upside remains capped by resistance near 1.1100 and beyond.
## Medium-Term Risks and Considerations
### Risks to the Downside
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