**GBP/USD Attracts Some Sellers Below 1.3500 on Renewed US Dollar Demand**
*By Haresh Menghani, as originally published on FXStreet.*
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The GBP/USD pair experienced a renewed wave of selling pressure on Friday, retreating back below the key 1.3500 psychological mark during the early part of the European session. This latest leg of downward movement was driven largely by the resurgence of the US dollar’s strength amid shifting Federal Reserve expectations and a cautious market tone ahead of crucial US macroeconomic data. The following comprehensive analysis explores the main catalysts driving GBP/USD price action and examines potential scenarios for the pair in the near term.
### Renewed US Dollar Demand Drives GBP/USD Lower
The cable’s inability to capitalize on earlier gains reflected fresh buying interest in the US dollar. Several factors contributed to this renewed demand for the world’s reserve currency:
– **Hawkish Federal Reserve Outlook**: Minutes from the latest FOMC meeting and recent speeches by Fed officials reinforced views that the US central bank remains committed to its tightening cycle to bring inflation under control. Traders are increasingly factoring in prospects of further interest rate hikes and a prolonged period of policy restraint.
– **Global Growth Concerns**: Ongoing uncertainties about the outlook for the global economy continued to spur safe-haven flows. Market participants remain wary given volatile equity markets, lingering effects of the pandemic, and geopolitical headwinds, all of which benefit the dollar.
– **Improving US Data**: Recent economic indicators from the United States have remained generally robust, supporting the idea that the Fed has both the motivation and the room to pursue tighter policy. Strong labour market data, healthy retail sales figures, and above-target inflation figures have underpinned dollar strength.
### UK Macro Headwinds Weigh on Sterling Sentiment
At the same time, the British pound faces several domestic challenges, limiting its scope for a meaningful recovery:
– **Weak UK Data Releases**: Recent macroeconomic data from the United Kingdom has failed to impress. GDP figures signalled sluggish growth while inflation numbers came in below some market expectations. This combination undermines the case for aggressive Bank of England (BoE) tightening.
– **Policy Divergence Expectations**: With the Fed perceived as being far ahead of the BoE in the policy normalization cycle, investors have grown increasingly wary about holding the pound, particularly against the broadly stronger US dollar.
– **Political and Economic Uncertainty**: The economic outlook in the UK is clouded by uncertainty over Brexit-related trade issues, cost of living concerns, and political frictions around the ability to restore fiscal discipline in the wake of massive pandemic-era stimulus.
### GBP/USD Technical Analysis: Key Levels in Focus
The technical backdrop for GBP/USD has deteriorated alongside the resumption of US dollar demand. The pair was last seen slipping back below 1.3500, a level that had previously provided short-term support. Several factors are worth noting:
– **Major Support at 1.3450**: Immediate attention is focused on the 1.3450 region, which has acted as a floor for GBP/USD in recent weeks. A clear break below this region would expose the pair to further downside in the direction of the 1.3400 mark.
– **Resistance Levels**: On the upside, initial resistance can be seen near the 1.3525-1.3530 area, followed by 1.3580 and 1.3600, the latter representing the 50-day moving average.
– **Technical Momentum Indicators**: Popular indicators such as the Relative Strength Index (RSI) on the four-hour and daily scale are trending lower, suggesting a bearish tilt and the possibility of deeper retracements.
– **Chart Patterns**: The recent price action has reinforced a short-term descending channel on lower timeframes, signalling that sellers remain in control unless price action decisively stabilizes above the 1.3600 mark.
### Broader Context:
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