**GBP/USD Weekly Outlook: Technical and Fundamental Analysis**
*Source: Action Forex (original author: ActionForex.com)*
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The GBP/USD pair saw a notable retracement last week, consolidating within a defined short-term range amidst ongoing global economic uncertainties and central bank policy speculation. Despite early hope for Pound Sterling on positive UK labor data, persistent US Dollar strength and shifting risk sentiment weighed on the pair. This article offers a thorough technical and fundamental overview of GBP/USD’s current market dynamics, with an in-depth look at key levels, market drivers, and probable trading scenarios.
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### Fundamental Overview
#### 1. *UK Economic Developments*
– **Labor Market**:
– Early in the week, UK labor data provided a glimmer of hope for GBP bulls. The unemployment rate ticked higher, but wage growth remained relatively robust. This suggested underlying inflationary pressure that the Bank of England (BoE) would need to closely monitor.
– Market participants interpreted the data as a sign that the BoE may delay interest rate cuts, offering limited support to Pound Sterling.
– **Inflation Outlook**:
– The persistence of above-target inflation is a principal concern for UK policy makers, and any surprises in upcoming inflation metrics will drive GBP volatility.
– Sticky services inflation means the policy easing cycle could be more gradual than currently priced in.
– **Bank of England Policy**:
– The Monetary Policy Committee remains cautious, emphasizing data dependency for future moves.
– Swaps markets indicate expectations for only one or two rate cuts by year end, limiting the downside for the Pound.
#### 2. *US Economic Data and Dollar Dynamics*
– **Federal Reserve’s Stance**:
– The Federal Reserve remains non-committal regarding the exact timing of its rate cuts, focusing instead on economic data releases for cues.
– May’s FOMC meeting confirmed a wait-and-see mode, reinforcing USD’s appeal as US yields remain elevated relative to peers.
– **US Economic Resilience**:
– Data continues to point to a resilient US economy, with robust job creation and solid consumer activity.
– Investors continue to price out aggressive Fed easing, leading to sustained US Dollar demand.
#### 3. *Risk Appetite and Broader Market Sentiment*
– **Safe Haven Flows**:
– Ongoing geopolitical tensions and uneven risk sentiment kept the US Dollar well bid during the week.
– The lack of clear progress in riskier assets capped any meaningful GBP gains, as traders preferred safety over yield-generating currencies.
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### Technical Analysis
#### 1. *Weekly Chart Overview*
– GBP/USD started the week with a modest rebound, peaking near 1.2850 before succumbing to renewed selling pressure.
– The pair ultimately retreated and ended the week below pivotal levels, confirming a short-term bearish bias but maintaining a broad sideways trend on the weekly chart.
#### 2. *Key Support and Resistance Levels*
– **Immediate Support**:
– The primary support zone was established around 1.2640 (recent swing low), followed by stronger support at 1.2530 (50% retracement of the March rally).
– A clear break below 1.2640 would tilt the risk towards a much deeper correction, potentially pitting the pair against 1.2500 and 1.2430.
– **Immediate Resistance**:
– On the upside, resistance is evident at 1.2800, the high from early May, with further hurdles at 1.2850 and the 1.2900 psychological level.
– Sustained movement above 1.2850 would point to a possible resumption of the medium-term uptrend targeting 1.3140 from May’s highs.
#### 3. *Trend and Momentum Indicators*
– **Moving Averages**:
– The pair remains above
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