**GBP/USD Downside Threat to the Key 1.09/1.08 Zone: Technical Analysis**
*By Steve Miley, as originally published on ForexTraders.com*
The GBP/USD currency pair continues to face significant pressure amid volatile global markets. As central banks in the US and UK remain steadfast in their monetary strategies, the pound sterling is showing fresh signs of underlying weakness versus the US dollar. This article presents a comprehensive technical analysis of the GBP/USD market environment, focusing on recent price action, key support zones, and the factors that could influence further downside movement.
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### Current Market Context
Economic headwinds are dominant in both the UK and global markets, setting the stage for continued volatility in the GBP/USD pair. Key drivers include:
– Hawkish actions from the Federal Reserve boosting the US dollar
– Persistent inflation concerns in the UK despite rising interest rates from the Bank of England
– Ongoing recession fears in both the US and UK economies
– Political and fiscal uncertainty following recent developments in the UK government
Given these dynamics, the overall bias for GBP/USD has been to the downside, with rallies considered corrective rather than true trend reversals.
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### Recent Price Action Overview
GBP/USD has experienced volatile, mostly downward movement since the start of 2022, with the pound coming under further pressure due to both domestic and global influences.
– The GBP/USD exchange rate has slumped from its mid-2021 highs well above 1.40, steadily declining through successive support levels.
– More recent price action since mid-2022 has seen the pair lurch towards the psychological 1.10 level, breaching it at times and hitting multi-decade lows.
– While some minor rebounds and corrective rallies have taken place, the overarching trend remains firmly bearish.
The shift in sentiment has been underpinned by the resilience and relative strength of the US dollar, coupled with skepticism over the UK economic outlook.
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### Key Technical Support and Resistance Levels
Analyzing price charts provides critical insight into where GBP/USD may find its next major challenges and possible inflection points.
#### Major Support Levels
– **1.1000**: This round number has provided periodic psychological and technical support.
– **1.0932**: Represents a recent swing low and intraday support level.
– **1.0890/1.0889**: Marks a critical zone; sustained breaks below here open the way for further large moves lower.
– **1.0725**: The 2022 low, and a focal point for longer-term bears.
#### Notable Resistance Levels
– **1.1250**: Short-term resistance, capping recent corrective rallies.
– **1.1350-1.1400 zone**: A confluence of prior breakdown points and moving averages.
– **1.1450**: High from mid-September 2022, represents a key upside barrier.
– **1.1600 and above**: Would signal a significant shift in sentiment if surpassed.
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### Technical Chart Analysis
Reviewing recent GBP/USD daily and weekly charts, key observations emerge:
– **Trendlines**: The pair remains well entrenched in a descending channel stretching back to early 2022, with each lower high reinforcing the overall downtrend.
– **Moving averages**: Shorter-term moving averages (20-, 50-day) continue to trend below their longer-term counterparts (100-, 200-day), confirming ongoing downside momentum.
– **Momentum indicators**: Relative Strength Index (RSI), while exhibiting periodic oversold readings that prompt corrective bounces, has not shown a sustained break out of bearish territory.
– **Volume patterns**: Selling volume remains heavy on down days, underscoring the conviction of bearish traders.
While brief rebounds occur—often driven by profit-taking or short-term shifts in sentiment—the overall technical backdrop remains negative for GBP/USD. Each rally to resistance is typically used as a selling opportunity.
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