**GBP/USD Finds Key Support Near 1.35 Despite Year-End Grind**
*By FXStreet Team*
The British Pound (GBP) continues to generate interest among forex traders, especially in its pairing with the US Dollar (USD). As 2024 nears its halfway point, the GBP/USD currency pair shows signs of stability after a year fraught with volatility and policy uncertainties. Despite a typically slow holiday trading environment, the market has found key technical and psychological support near the 1.3500 mark, a level that has gained attention after numerous tests over the past few quarters.
This article surveys the latest performance of GBP/USD, explores the factors underpinning the recent price action, and outlines the broader macroeconomic context that may shape this major forex pair heading into the new year.
## GBP/USD: Price Action Analysis and Key Technical Levels
As the end of December approaches, GBP/USD is trading with subdued momentum, largely contained within a narrow range. After slipping from mid-December highs around 1.3600, sterling has attracted buying interest on dips toward 1.3500, a level now acting as critical support for the pair. The following points summarize recent price action:
– The December trend has been mildly bearish as traders take profits and rebalance positions, but buyers have generally protected the 1.3500 handle.
– A brief move below 1.3500 last week was swiftly bought, suggesting market participants see value at this level.
– Immediate resistance is noted around 1.3600, with further sellers expected near 1.3660, the late-September swing high.
– On the downside, a break and close under 1.3500 on the daily chart could provoke further losses toward 1.3400, an area that previously offered support during October’s consolidative phase.
Technical indicators corroborate the view of range-bound trading. The daily Relative Strength Index (RSI) hovers near neutral, offering little directional bias at current levels. Meanwhile, the pair remains above its 200-day moving average, a longer-term sign of resilience even as near-term momentum falters.
## Macroeconomic Backdrop: UK and US
The GBP/USD pair is sensitive to divergent economic growth trajectories and monetary policy expectations between the United Kingdom and the United States. Here’s a breakdown of recent developments influencing both countries:
### 1. UK Economic Overview
– British economic data has shown signs of resilience, particularly in the labor market and consumer spending, though inflation concerns remain persistent.
– The latest readings of UK CPI suggest inflation is moderating but remains above the Bank of England’s 2 percent target.
– The Bank of England (BoE) maintained a relatively cautious tone at its recent meeting, reiterating the need for tighter policy for a longer period. While the market now expects the BoE’s rate hiking cycle is at or near its peak, forward guidance remains data-dependent.
– Political stability following last year’s change of government leadership has helped soothe market nerves, supporting GBP at a time of global uncertainty.
### 2. US Economic Overview
– The US economy continues to show robust growth indicators, with GDP figures beating expectations and the labor market remaining tight.
– Fed officials have signaled that while the central bank is prepared to maintain elevated rates for an extended period, some policymakers are beginning to discuss the timeline for eventual policy normalization.
– The return of the US Dollar to a stronger footing during Q4 has weighed on GBP/USD, driven by a ‘higher for longer’ narrative from the Federal Reserve and a risk-off tone in global markets.
– Geopolitical tensions and concerns over US Treasury yields have stoked safe-haven demand for the Dollar, resulting in temporary dips for cable.
## Drivers Behind GBP/USD’s Resilience Near 1.35
Several factors have contributed to GBP/USD’s ability to find a footing near 1.3500, even as markets digest less-than-ideal global macroeconomic news:
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