**GBP/USD Price Forecast: Pound Drops to 1.3290**
*Original article by Trading News Staff, via TradingNews.com*
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The GBP/USD currency pair, commonly known as “Cable,” has been under immense pressure over the past week, culminating in a sharp drop to the 1.3290 level. This sudden movement has prompted market analysts, traders, and investors to re-examine the outlook for the British pound against the US dollar. This comprehensive analysis dives deep into the key drivers behind this move, technical and fundamental perspectives, and what could be in store for GBP/USD in the near to medium term.
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## Recent Movements in GBP/USD
For the past month, the pound had been trading in a relatively narrow range, with market participants awaiting key macroeconomic data from both the UK and the US. However, the landscape changed quickly as several critical data releases and geopolitical events added volatility to the market.
– GBP/USD fell sharply from the 1.3500 resistance area.
– The pair broke through several key support zones before settling near 1.3290, its lowest level since early in the year.
– The decline represented a drop of more than 1.5 percent in a matter of days.
This steep decline has shifted sentiment, with many market participants now forecasting sustained bearish pressure.
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## Key Drivers Behind the Drop in GBP/USD
### Hawkish Federal Reserve
One of the primary reasons for the pound’s decline has been renewed strength in the US dollar, fueled by a more hawkish Federal Reserve.
– The FOMC signaled the possibility of additional rate hikes, citing persistent inflation.
– US Treasury yields moved higher, increasing the appeal of the US dollar for yield-seeking investors.
– Fed Chair Jerome Powell reiterated the central bank’s commitment to bringing inflation under control, even at the cost of slowing economic growth.
### UK Economic Weakness
While the US dollar has benefited from hawkish monetary policy, the British pound has been burdened by growing signs of economic fragility.
– UK GDP contracted by 0.3 percent in the most recent quarterly reading, sparking concerns of a technical recession.
– Business activity, as indicated by the recent PMI figures, continued to slow, especially in the services sector.
– Inflation pressure in the UK remains high, but the Bank of England has signaled caution about further aggressive tightening due to fears of triggering a deeper downturn.
### Political Uncertainty
The British pound has also been weighed down by renewed political instability.
– Ongoing debates within Parliament regarding post-Brexit trade arrangements with the European Union.
– Uncertainty around the government’s fiscal policy, with delayed announcements causing unease in financial markets.
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## Technical Analysis: Key Levels to Watch
The latest price action in GBP/USD provides important clues about sentiment and potential future moves.
### Support and Resistance
– Immediate support is now seen at the 1.3250 level. A clean break below this area could see Cable testing the 1.3200 psychological support.
– Immediate resistance on the upside sits at 1.3350, with further resistance near 1.3400.
### Moving Averages
– The 50-day simple moving average (SMA) has slipped below the 100-day SMA, forming a bearish crossover.
– GBP/USD is well below both the 50-day and 200-day SMAs, underlining the prevailing bearish momentum.
### Relative Strength Index (RSI)
– The RSI is hovering just above 30, indicating that GBP/USD is approaching oversold conditions. That being said, the RSI has not yet flashed an extreme reading, implying that there may still be room for further declines before a corrective rebound.
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## Economic Indicators in Focus
Both UK and US economic calendars for the next several weeks are packed with high-impact risk events likely to influence GBP/USD movements.
### For the UK
– Next Bank of England rate decision
– Consumer Price Index (CPI) inflation data
Read more on GBP/USD trading.