GBP/USD – Bearish Momentum Builds as Pair Tests Key Support Levels
GBP/USD extended recent losses in Wednesday’s session, reaching an intraday low at 1.3431, marking its weakest point since last Friday’s dovish-Fed-induced peak near 1.3543. Trading conditions remained notably subdued, with cable confined within a narrow 34-pip intraday range (1.3431-1.3465) since the London open, indicating cautious positioning ahead of critical technical and fundamental developments.
Technically, the bearish sentiment intensified as GBP/USD dipped decisively below Tuesday’s low of 1.3435, confirming continued bearish momentum in the near term. The inability of the pair to reclaim psychological resistance at 1.3500 earlier this week, combined with consistent selling interest above 1.3465, highlights significant underlying bearish pressure. Immediate resistance now clearly resides at Tuesday’s intraday high around 1.3465, followed by a more formidable resistance near the recent peak at 1.3543, set immediately after Powell’s dovish Jackson Hole comments.
From a technical perspective, the immediate bearish target lies at the critical psychological support at 1.3400, closely aligned with last Friday’s pre-Powell two-week low of 1.3393. This level is expected to draw significant buying interest initially, forming a critical short-term pivot. A sustained daily close beneath 1.3400 would significantly amplify downside risks, targeting deeper supports at the mid-August low near 1.3346 and potentially towards the 50% Fibonacci retracement of the broader bullish wave from 1.2712 to 1.3787, situated at approximately 1.3250.
Momentum indicators reinforce the bearish outlook, with the daily Relative Strength Index (RSI) moving steadily downward below the neutral 50-line, indicating increasing downside momentum potential. The MACD indicator remains negatively aligned, highlighting bearish sentiment’s persistence in the short-to-medium term.
From a fundamental perspective, cautionary statements from Bank of England MPC members add considerable uncertainty for GBP traders. Hawkish MPC member Catherine Mann has signaled readiness for substantial and swift rate cuts if downside economic risks emerge, complicating the medium-term outlook. Further highlighting risks, BoE Governor Andrew Bailey’s comments emphasize Britain’s ongoing challenge from weak underlying growth, a situation that could materially impact sterling if dovish policy measures become necessary.
Meanwhile, the macroeconomic backdrop adds further bearish pressures. Recent data revealed UK producer price inflation rose to 1.9% year-over-year in June, alongside regulator Ofgem’s announcement of a 2% increase in energy price caps effective October. These inflationary pressures could exacerbate economic vulnerabilities, thus reinforcing concerns over the potential necessity of future dovish BoE action.
In summary, GBP/USD’s technical outlook remains distinctly bearish, with key immediate support at 1.3393-1.3400 now in sharp focus. Traders should closely monitor price action at these levels. A confirmed daily close below 1.3393 could significantly enhance bearish momentum, targeting deeper technical support at 1.3346 and potentially towards 1.3250. Conversely, bullish recovery attempts require a decisive break above immediate resistance near 1.3465 and subsequently at 1.3543, before confidently shifting short-term sentiment.