**British Pound Short-Term Outlook: GBP/USD Plunge Pauses at Support Ahead of BoE**
*Original analysis by Fawad Razaqzada, FOREX.com*
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The British pound (GBP) has experienced considerable volatility in recent trading days, with GBP/USD plunging to multi-month lows as the US dollar has continued to climb. Several factors have contributed to this bearish momentum in the GBP/USD pair, including shifting expectations regarding both US and UK interest rates, mixed UK economic data, and heightened risk aversion in global markets. As the pair finds interim support ahead of a pivotal Bank of England (BoE) interest rate decision, traders must weigh the technical and fundamental signals shaping the outlook for the GBP in the near term.
Below, we delve into recent GBP/USD performance, the drivers behind the move, critical support and resistance levels, and what traders should expect as the BoE meeting approaches. All analysis is based on the original article by Fawad Razaqzada of FOREX.com.
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### GBP/USD Technical Picture: A Pause at Long-Term Support
**Recent Price Actions:**
– GBP/USD started the month on a soft note, accelerating its decline after breaking critical chart supports.
– The pair has now returned to an important region near 1.2300-1.2335, a zone that has offered notable support on several occasions since late 2023.
**Key Technical Levels to Watch:**
– **Support:**
– 1.2300-1.2335: Historically significant, previously marking the bottom of multi-month trading ranges.
– Below this: 1.2200, the cycle low from last October, and then 1.2100, which represents a psychological round number and historical pivot area.
– **Resistance:**
– 1.2400: Recent interim pivot, and a level to reclaim if the bulls are to regain momentum.
– 1.2500: Heavier resistance aligned with mid-April’s consolidation range.
– Further up, 1.2600 stands as a formidable ceiling given its longer-term significance.
**Chart Analysis:**
– The daily chart shows a clear series of lower highs and lower lows, underscoring the persistent downtrend.
– Bearish momentum spans momentum oscillators such as RSI and MACD, with neither indicating deeply oversold readings—leaving more downside open if key supports break.
– However, the market is pausing and consolidating, suggesting short-term exhaustion in the selling pressure ahead of upcoming event risk from the BoE.
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### Fundamental Factors Behind GBP/USD Weakness
**1. US Dollar Strength**
The US dollar has been bolstered by a combination of rising US Treasury yields and shifting Federal Reserve expectations. Persistent inflationary pressures in the US have dampened hopes for a series of Fed rate cuts this year, lending the dollar considerable support. The inverse is also true: softer US inflation or labor market data could quickly see the dollar give back some of these gains.
**2. UK Economic Data Has Been Mixed**
– The latest UK PMI releases suggest resilience in the services sector, with the headline reading above the boom-bust threshold of 50.
– Manufacturing remains subdued, and the UK’s GDP trajectory is modest at best.
– Wage growth has cooled somewhat, but price pressures remain sticky, reflecting the challenge facing the BoE.
**3. Bank of England Policy in Focus**
The BoE has, up to now, maintained a cautious tone regarding future rate cuts. Headline inflation has continued to outpace that of the US and Eurozone, fueled by domestic price pressures—including a tight labor market and resilient wage growth. However, with UK growth lagging and inflation showing gradual signs of moderation, expectations for a 2024 rate cut are building in the market.
– **BoE Rate Expectations:**
– Market pricing currently anticipates at least one rate cut in 2024, potentially as
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