GBP/USD begins a crucial week, which is marked by increased volatility and key economic drivers. As the market braces for key events, traders closely monitor the currency pair, which currently faces two-way risks. The U.S. Dollar has experienced a strong recovery from recent multi-year lows, helping to shape the underlying dynamics of GBP/USD.
For the traders the near-term level of interest comes in at the psychological figure of 1.3750 which marks the next topside hurdle for GBP/USD. Market analysts think if bulls are to push the price higher, then the 1.3800 level will be next. A continued rise above the current measure would trigger this challenge. On the flip side, the duo has recently experienced a wave of stopping short of record highs, suggesting volatility is in store over the coming days.
Recent Market Trends
The recent GBP/USD consolidation period, after the impressive correction from its almost four-year high of 1.3789. This news comes as the U.S. Dollar hits a two-decade high, increasing the relative value of the Pound Sterling. The sellers have maintained the upper hand throughout this recovery, indicating possible headwinds to come for GBP/USD.
On Monday, GBP/USD broke above the important former resistance-turned-support line of 1.3643 set in Feb. 2022. This shift raises concerns of a reversal into a downward trend. Should the currency pair stay below this mark, things may be set to get much worse. A major bearish break would send GBP/USD down toward the June 23 low at 1.3371. This level represents a key turning point for traders.
The first key resistance obstacle is found at the 21-day Simple Moving average (SMA) located at 1.3595. GBP/USD must hold firm above this level to uphold its bullish momentum. In a perfect world, it’d break through 1.3750 to build up even more momentum.
Economic Indicators and Their Impact
Recent economic data released in the UK have filled in some necessary context for today’s turbulent market. During the last month, in May, the Monthly Industrial Production numbers reported a contraction of 0.9%. Meanwhile, Monthly Manufacturing Production fell -1%. These underwhelming outcomes have all helped conjure an overall bearish sentiment around GBP/USD.
Additionally, other outside forces, like U.S. President Donald Trump’s tariffs continue to hold strong sway over the market mood. American trade negotiations with countries around the world will likely be an even bigger story this week, cascading the impact on currency swings.
Traders are highly focused on next week’s U.S. Consumer Price Index (CPI) report. Not surprisingly, this report is poised to recalibrate market expectations around the timing of any Federal Reserve rate cuts later this year. The CPI data will help shape the public’s perception of inflation and the direction of monetary policy. This, in turn, will dictate the strength of the U.S. Dollar versus the Pound.
Technical Analysis and Outlook
Technical analysis indicates that GBP/USD is at an inflection point, with multiple indicators pointing to potential volatility in the near-term. The 14-day Relative Strength Index (RSI) has just crossed below its midline. It currently sits at 49, indicating that the tide might be turning.
The new line in the sand for GBP/USD is the 100-day SMA at 1.3252. A prolonged move under this level would almost certainly serve as the rallying point for additional damage and reestablish a bearish tone within traders.
Should GBP/USD penetrate the short-term resistance levels, the pair may consolidate and build upside momentum. As long as it stays anchored above important support levels, the currency pair could climb back up to major targets.
Traders prepare for another wild week in front of them. They’ve been waiting on big trade negotiating breakthroughs and CPI inflation news that might change the market narrative. Conducting united economic indicators with the context of geopolitical events will continue to be key in determining GBP/USD’s path.