Post-BoE Kneejerk Rally Faces Stiff Headwinds for GBP/USD
Post-BoE Kneejerk Rally Faces Stiff Headwinds for GBP/USD
1. Price Action and Immediate Structure
GBP/USD initially surged past 1.3400 following the BoE’s unexpectedly close 5-4 vote for a rate cut, touching an intraday high of 1.3437 before momentum faded. Price action is already showing signs of exhaustion as the pair struggles to maintain bids above the psychological 1.3400 handle. The fade below the session high reflects profit-taking and an unwillingness to commit to extended upside in the face of a challenging macro backdrop.
2. Resistance and Bull Trap Risk
Overhead resistance remains heavy at 1.3500 and the July 23/24 double top at 1.3585. The inability to close above 1.3437 raises the risk of the post-BoE rally forming into a bull trap. A decisive break back below 1.3375–1.3380, which marks the pre-BoE price zone, would confirm this scenario and potentially trigger a deeper correction toward 1.3300.
3. Momentum and Indicator Signals
Momentum indicators are showing divergence between price action and oscillator strength. The RSI (14) is stalling just below overbought levels, suggesting waning bullish conviction. MACD lines have flattened after a brief expansion, hinting that upward momentum may be short-lived without a catalyst. Price is currently riding the upper Bollinger Band, a position that often precedes a pullback when met with strong overhead resistance.
4. Outlook
While the kneejerk rally reflects a short-term shift in rates market sentiment, the prevailing macro environment of stagflation weighs against sustained GBP strength. Unless cable can break and hold above 1.3500 with follow-through volume, upside potential is limited. A close back below 1.3375 would confirm fading bullish momentum and open the path for a retest of the 1.3300 support zone.