**The GBP/USD is Breaking Critical Support – In-depth Analysis (29-07-2025)**
*Original author: Economies.com team*
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**Overview and Current Market Scenario**
On July 29, 2025, the GBP/USD currency pair witnessed a pivotal development as it broke below critical support levels, signaling potential for further downward momentum. This analysis aims to provide forex traders and market watchers with a comprehensive understanding of the ongoing price action, underlying technical indicators, and the fundamental backdrop shaping the pound-dollar exchange rate.
At the start of the European session, GBP/USD traded under substantial bearish pressure, reflecting heightened volatility seen over the last several trading days. The breach of key support levels is being regarded as a consequential event, with short- to medium-term implications for both intraday traders and position investors.
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**Technical Analysis**
*Key Price Movements*
– GBP/USD opened the session sharply lower, driven by risk-off sentiment and dollar strength.
– The pair decisively broke below the previously identified support zone of 1.2750, a level that has acted as a major floor since late June.
– After piercing through this support, the pair quickly retraced toward the next support band near 1.2700 before attempting minor recoveries.
*Support and Resistance Levels*
– **Major Support:** The most significant near-term support is observed at 1.2700. A sustained close below this area enhances selling pressure, placing the next target at 1.2620.
– **Immediate Resistance:** The intraday resistance zone stands at 1.2775, aligning with previous swing lows and the 50-period moving average on the 4-hour chart.
– **Key Upcoming Levels:**
– 1.2670 (March’s swing low)
– 1.2600 (psychological support)
– 1.2850 (intermediate resistance)
*Indicators and Oscillators*
– **Relative Strength Index (RSI):** The RSI on the daily chart has entered oversold territory, suggesting the possibility for minor corrections or sideways consolidation.
– **Moving Averages:** The 50- and 200-day simple moving averages (SMAs) continue to indicate a bearish crossover, strengthening the overall downward bias.
– **Trendlines:** The break below the ascending trendline from the May 2025 rally confirms a medium-term bearish reversal.
*Chart Patterns*
– The recent candles confirm strong bearish momentum, with long-bodied red candles validating seller control.
– No significant bullish reversal patterns are currently evident on the short-term charts.
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**Fundamental Factors Affecting GBP/USD**
Several macroeconomic and geopolitical drivers are contributing to the current dynamics affecting sterling against the dollar.
1. **US Dollar Strength**
– US economic data continues to outperform expectations, leading to a broad-based US dollar rally.
– The Federal Reserve’s recent statements pointed to the possibility of keeping rates higher for longer, which has attracted yield-seeking investors toward the greenback.
– Market sentiment favors risk-off positioning, further benefitting the dollar.
2. **UK Economic Uncertainties**
– The UK economy is experiencing slower GDP growth due to lingering Brexit-related frictions and weaker consumer sentiment.
– Inflation, though improving, remains a concern for the Bank of England, which faces a delicate balancing act between supporting economic activity and keeping price growth in check.
– The recent release of below-expectation UK retail sales figures has added to the negative momentum for GBP.
3. **Central Bank Divergence**
– While the Federal Reserve is maintaining a hawkish stance, the Bank of England is striking a more cautious tone.
– Differentials in rate expectations and policy outlooks are amplifying the bearish bias on GBP/USD.
4. **Geopolitical Risks**
– Renewed trade tensions between the UK and the EU are heightening investor caution.
– Middle East tensions and global market uncertainties are further elevating demand for safe-h
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