Renewed selling pressure is building on the GBP/USD currency pair following last week’s rebound from the weekly low of 1.3415. With the pair now trading just under 1.3475-1.3470 region, it represents a loss of 0.15% on the day. Traders are taking a step back as the US Dollar (USD) makes a slight comeback. This timing is just ahead of the release of the US Personal Consumption Expenditure (US PCE) Price Index, a key inflation signpost.
Short sellers are increasingly focusing their activity on the GBP/USD currency pair. If such a decline is possible, the prospects for one seem pretty far away at this point. Traders may be adopting a cautious approach as they await the PCE data, which could significantly influence market sentiment and trading strategies.
Current Market Sentiment
The recent short squeeze in GBP/USD illustrates a complicated collision of central bank and fiscal policy driving market SURPRISE. So after rebounding off 1.3415, not surprisingly a lot of traders were expecting some bullish continuation. The arrival of new sellers has quickly turned traders’ attention again to possible downside risks. The pair now sits in the vicinity of 1.3475. This point serves as a reminder that bullish momentum is getting increasingly difficult to sustain – particularly when faced by a stronger US Dollar.
Traders are closely monitoring the PCE data release, as it could either reinforce or challenge the existing bullish bias in the GBP/USD pair. For now, most are looking to play it safe and make big deals. They’d rather wait until after the data is released so they have a better idea of what’s going on in the market.
Technical Analysis and Indicators
From a technical perspective, the present state of GBP/USD is laying bare prospective technical obstacles and areas of support that traders should be aware of. Further corrections may be planned after the recent retreat from the 1.3600 peak, which was the most elevated place since February 2022. The next major support levels are between 1.3425-1.3415. A firm break under this range might change the market’s bias toward bearish traders and potentially start a move down to retest the 1.3300 level.
On the daily chart, the indicators are still resoundingly positive, supporting GBP/USD bulls. Additionally, oscillators on hourly charts have begun to show an emergence of negative momentum. That means a major intraday dive could be just around the corner as investors react to today’s market landscape and prevailing economic signals.
If GBP/USD remains above the 1.3425-1.3415 area, bulls would be able to receive attractive buying opportunities. Unlike bonds, they can capitalize on any positive momentum that typically accompanies a PCE data release. A sharp decline under this support area would invalidate the short-term positive view on the pair.
Future Trading Opportunities
On the long side Traders are looking at every opportunity to increase their GBP/USD positions looking forward. A sustained strength and acceptance above the psychological level of 1.3500 could signal fresh buying opportunities for bullish traders seeking to re-enter the market. An overwhelming push past this barrier would certainly unlock a transition to much bigger challenge—the next big hurdle to clear. Look too for action in and around the 1.3540-1.3545s.
If prices fall to 1.3425-1.3415 area then treat it as a buying opportunity. That latter part is particularly important for anyone who wants to see GBP/USD continue its bullish long-term uptrend. Traders are understandably nervous knowing that this dynamic could change in an instant depending on the next round of economic data releases and general market sentiment.