GBP/USD Price Forecast: Softens below 100-day EMA amid bearish technical setup

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GBP/USD drifts lower to near 1.3225 in Monday’s early European session.
The pair maintains the bearish outlook in the daily chart, capping below the key 100-day EMA.
The first upside barrier emerges at 1.3273; the initial support level is located at 1.3147.

The GBP/USD pair trades on a softer note around 1.3225 during the early European session on Monday. Rising bets of a Federal Reserve (Fed) rate cut in December might weigh on the Greenback and cap the downside for the major pair. Traders are now pricing in an 87% odds the Fed will cut by 25 basis points (bps) when it meets next week, according to the CME FedWatch tool.

UK Chancellor Rachel Reeves revealed the UK's Autumn Budget last week, which includes tax hikes and changes to business rates, benefits, and pensions. The positive sentiment stemming from increased fiscal clarity could lead to a modest relief rally for the Pound Sterling (GBP) against the US Dollar (USD) in the near term.

Technical Analysis:

In the daily chart, GBP/USD trades at 1.3225. The 100-EMA slopes lower at 1.3307, capping topside and preserving the broader downtrend. A recovery would need a sustained close above that average to ease bearish pressure. Price sits in the upper half of the Bollinger envelope as bands modestly widen, pointing to improving momentum. RSI at 52.88 remains above 50 but has eased from 54.94, cooling near-term impulse. Immediate resistance is the upper band at 1.3273, while the middle band at 1.3147 and the lower band at 1.3020 serve as supports.

Staying below a descending 100-EMA keeps bulls on the back foot; a decisive push above the upper Bollinger Band could open the way toward that moving average. Failure to clear the band would keep the pair rotating back toward the middle line within the envelope. RSI holding above 50 supports a mild bullish bias, but a break back under the threshold could drag price toward the lower band, leaving the broader trend tilted south.

(The technical analysis of this story was written with the help of an AI tool)

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

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