**FxWirePro: GBP/USD Struggles to Extend its Recovery — Good to Sell on Rally**
*Original Author: FxWirePro (as credited by EconoTimes)*
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The GBP/USD currency pair has been navigating a challenging trading environment in recent sessions. Despite attempts to rebound, the recovery appears unconvincing, constrained by various technical and fundamental headwinds. This article delves into the recent price action, analyzes key drivers, and assesses the outlook for GBP/USD, making a case for considering selling on rallies as market sentiment remains cautious.
**Recent Price Action and Technical Analysis**
Over the last few trading sessions, GBP/USD has struggled to maintain upward momentum. After hitting multi-month lows, a modest recovery has been observed. Yet, the rebound faces resistance near significant technical levels, highlighting the pair’s overarching bearish pressure.
– GBP/USD recently attempted a snapback rally, recovering modestly from sub-1.2000 levels
– Price action has found it difficult to break and hold above the 1.2150-1.2200 resistance zone
– Technical indicators reflect bearish undertones, with daily Relative Strength Index (RSI) remaining subdued and well below the overbought threshold
– Moving averages are indicative of downside risk, as GBP/USD trades below key short-term and long-term averages, such as the 21-day and 55-day EMAs
– Chart patterns suggest a lack of strong bullish momentum, with lower highs and lower lows dominating the medium-term structure
**Key Support and Resistance Levels**
Being mindful of support and resistance levels can guide traders in execution and risk management:
– Immediate resistance stands at 1.2150, followed by the next significant hurdle at 1.2200
– Stronger resistance is likely around 1.2250, aligning with the 55-day EMA and previous price pivots
– On the downside, the immediate support lies near 1.2050, with a breach opening the possibility for a retest of the 1.2000 psychological level
– A more decisive breakdown below 1.2000 could trigger further losses toward the 1.1900 area or even lower
**Fundamental Factors Influencing GBP/USD**
Several fundamental catalysts continue to weigh on GBP/USD performance, limiting its ability to stage a sustainable recovery rally. Both domestic UK developments and broader global market influences are shaping the pair’s outlook.
– **Bank of England Monetary Policy**: Recent BoE communications have maintained a relatively hawkish tone amid elevated inflation, but mixed economic data has raised questions about the likelihood of further aggressive policy tightening.
– **UK Macroeconomic Data**: Disappointing growth figures and persistent cost-of-living challenges have dented confidence in the UK economic recovery. While inflation remains above target, consumer sentiment and retail sales have shown signs of strain.
– **US Dollar Dynamics**: The US dollar has remained broadly resilient, underpinned by higher Treasury yields and expectations for a prolonged period of Federal Reserve tightening. This dollar strength is a headwind for GBP/USD.
– **Risk Sentiment and Global Markets**: Episodes of risk aversion in the broader market, stemming from economic uncertainty, geopolitical tensions, or central bank actions, tend to favor the safety of the US dollar over the British pound.
– **Political Uncertainty**: Ongoing domestic political developments in the UK, including government stability, policy direction, and Brexit-related concerns, add another layer of uncertainty to currency markets.
**Detailed Technical Picture for GBP/USD**
A closer technical inspection yields a cautious outlook for GBP/USD. The pair’s inability to breach and sustain above key technical points suggests rallies are likely to be sold into, instead of providing a launchpad for further upside.
– Daily and weekly candlestick charts display repeated failures to take out resistance around the 1.2150/1.2200 zone
– Bearish continuation patterns, such as descending channels and failed reversal attempts, are evident on higher time
Read more on GBP/USD trading.