**GBP/USD Slides Closer to Mid-1.3200s; Downside Seems Limited Ahead of BoE This Week**
*Adapted from original reporting by Haresh Menghani, FXStreet*
The British Pound (GBP) continued its downward trajectory against the US Dollar (USD) at the start of a pivotal week for the currency pair, with the GBP/USD sliding toward the mid-1.3200s during the early Asian session on August 4th, 2020. Investors are closely monitoring developments ahead of the Bank of England’s (BoE) monetary policy decision, seeking cues on future policy direction, while also keeping a keen eye on Brexit negotiations and broader risk sentiment.
Below, we delve into the key drivers behind the recent slump in GBP/USD, explore potential support and resistance levels, and provide a comprehensive outlook for the pairing in the context of upcoming high-impact events.
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## Key Developments Impacting GBP/USD
### 1. Persistent US Dollar Strength
The US Dollar regained strength at the start of the trading week, underpinned by:
– Renewed demand for safe-haven assets amid global economic uncertainties
– Concerns over second-quarter GDP contractions in major economies
– Tensions surrounding a potential delay in the upcoming US stimulus package
This resurgence in USD buying pressured the GBP/USD lower, overshadowing any marginally positive developments for the Pound.
### 2. Heightened Brexit-Related Risks
The latest round of Brexit negotiations between the UK and European Union (EU) failed to yield a breakthrough, raising the threat of a no-deal scenario. Key sticking points include:
– Disagreements over fisheries
– Divergences on regulatory alignment and trade rules
– Uncertainty over post-transition period arrangements
Such ongoing uncertainty continues to cap any significant rallies in the Pound and adds to negative sentiment.
### 3. Anticipation of the Bank of England’s August Decision
With the BoE’s policy meeting slated for later in the week, traders are keenly awaiting:
– Updates on current monetary stance
– Possible changes to the pace of asset purchases under the quantitative easing (QE) program
– Forward guidance regarding negative interest rates
Market participants are widely expecting the BoE to hold rates steady and maintain existing bond-buying targets. However, any dovish tilt in the rhetoric could reinforce downward pressure on the GBP.
### 4. Mixed UK Economic Data
Recent data offered a mixed picture of the UK economy:
– The final readings of UK Services PMI came in slightly above expectations, indicating continued recovery in the sector.
– However, ongoing concerns about a potential resurgence in COVID-19 cases and local lockdown measures have tempered enthusiasm.
Such contradictory signals mean traders remain cautious, waiting for stronger confirmation of UK economic resilience before reinstating bullish GBP positions.
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## Technical Analysis: GBP/USD Near Key Support
GBP/USD extended its pullback for a third consecutive session, retreating from last week’s highs near the 1.3170 mark and approaching the mid-1.3200s at the session’s open. Several factors are contributing to the current technical landscape.
### 1. Immediate Support Levels
– The pair is testing initial support near the 1.3050-60 region, marking a pivotal short-term floor.
– Further weakness could expose the psychological 1.3000 level, which has served as a reliable support zone in recent months.
### 2. Resistance Levels in Focus
– Any meaningful recovery will likely encounter resistance around the 1.3130-40 hurdle, representing last week’s consolidation area.
– A decisive break above 1.3170 could reinvigorate bullish momentum, potentially targeting the 1.3200 handle.
### 3. Technical Indicators
– The Relative Strength Index (RSI) on the daily chart has cooled from overbought territory, suggesting additional room for downside correction, though with no immediate threat of excessive selling.
– Moving averages are still positively aligned
Read more on GBP/USD trading.