Resistance at Key Levels
GBP/USD faced resistance at key levels on Monday, with the pair’s rebound stalling near the 200-day and 200-week moving averages at 1.2814-22. After a brief post-payrolls rally, driven by a rise in the U.S. unemployment rate that bolstered Fed rate-cut expectations for December, the pair faltered as the broader dollar strength narrative reasserted itself. Fed officials, including Hammack, have indicated the possibility of a pause in Q1 2024, keeping the dollar supported and limiting sterling’s upside. The lack of follow-through gains underscores the scarcity of attractive alternatives to the dollar.
Technical Analysis
Technically, GBP/USD remains capped by critical resistance, with the 1.2821 area proving to be a formidable barrier. Failure to break above this level has refocused attention on key support at 1.27, followed by 1.2665 (August low) and the psychological 1.25 mark. The pair remains vulnerable to downside risks as long as it trades below the 200-day moving average, with the RSI indicating a lack of bullish momentum. A sustained break above 1.2821 would be needed to shift sentiment and open the door to a test of higher levels.
Looking Ahead
Looking ahead, range-bound trading is likely to persist until new catalysts emerge. The release of U.S. CPI data could provide clearer direction, with a softer-than-expected print potentially weakening the dollar and allowing GBP/USD to retest resistance levels. Conversely, a stronger CPI reading would reinforce the dollar’s dominance, increasing the likelihood of a move toward the 1.27 support zone and beyond.