GBP/USD Daily Chart Analysis – 2024-08-07

The GBP/USD is currently trading at 1.2702, reflecting a 0.6% decline during the New York afternoon session. The pair has hit a new low of 1.2670, indicating strong bearish momentum. Key technical levels reveal support at the daily cloud top of 1.2725, the 100-Day Moving Average (DMA) at 1.2680, the 200-DMA at 1.2645, and the daily cloud base at 1.2585. Resistance is identified at the 50-Hour Moving Average (HMA) of 1.2755, Tuesday’s high of 1.2803, and the 50% retracement level of the move from 1.3000 to 1.2672 at 1.2848.

The recent decline in GBP/USD is largely due to concerns over global economic growth and changing market sentiment regarding the Bank of England’s (BoE) future policy actions. The sterling has been on a downward trend since reaching a high of 1.3044 in July, in line with the Federal Reserve’s dovish stance before its decision to hold rates on July 31. The BoE’s dovish tones have become more pronounced, especially after the rate cut on August 1. Despite attempts to manage market expectations with a data-dependent approach and warnings against rate speculation, recent comments from BoE Governor Bailey indicate that future forecasts are based on the current market curve, suggesting lower rates.

The unwinding of significant speculative long positions in sterling, which stood at 142,183 contracts as of July 23, is adding to the downward pressure on GBP/USD. The breach of key technical supports, such as the daily cloud top at 1.2700 and the 100-DMA at 1.2680, points to a bearish outlook. The pair may test further support levels, including the 200-DMA at 1.2655 and the daily cloud base at 1.2579. Ongoing concerns about global growth and the potential for further BoE rate cuts are key factors influencing GBP/USD’s price action. With the likelihood of Fed rate cuts decreasing, the high-beta sterling remains vulnerable to additional declines if economic growth continues to falter, leading to more dovish expectations from the BoE.