GBP/USD Bears Confront Key Support Amid Broader Market Weakness

Thursday Market Overview:

European stock markets plunged on Thursday following a widespread sell-off on Wall Street, driven by disappointing earnings reports from Tesla and Alphabet. Simultaneously, a significant strengthening of the Japanese yen against major currencies due to potential intervention by the Bank of Japan has put additional pressure on major European currencies, including the pound and the euro. The lackluster PMI reports from both Europe and the UK failed to provide sufficient support for the pound, exacerbating its downward trend.

Technical Analysis:

In the four-hour chart, GBP/USD is charting a bearish path after rebounding from the 100 and 34-period moving averages near the resistance at 1.29371. Sellers are driving the price towards the key support at 1.28770, the last significant low. A breach of this critical support could signal increased selling pressure, targeting the immediate support at 1.28607, which would solidify the downtrend. Continued bearish momentum could push the price further down to the support zone between 1.28361 and 1.28169. The downward cross of the 34 and 100 moving averages, coupled with the RSI entering the oversold territory, indicates growing seller dominance.

Alternative Scenario:

If sellers fail to achieve a sustained break below 1.28770, the price may enter a sideways trend, with resistance levels at 1.29000 and the descending trendline coming into focus for buyers. However, only a breakout above 1.29231 would signal a potential trend reversal to bullish.

Key Levels:

Resistance Levels:

• Resistance 2: 1.29371
• Resistance 1: 1.29000

Current Price (at the time of analysis): 1.28823

Support Levels:

• Support 1: 1.28770
• Support 2: 1.28607
• Support 3: 1.28361
• Support 4: 1.28169

Impactful Events:

Key developments that could impact the GBP/USD pair on Thursday include the UK’s CBI Business Optimism Index (Q3), US Durable Goods Orders, quarterly GDP growth, and the weekly jobless claims report.

Oscillators:

RSI (Relative Strength Index): Bearish, indicating sustained selling pressure.

MACD (Moving Average Convergence Divergence): Bearish, reinforcing the downward trend.

Moving Averages: Bearish, reflecting the current downward momentum.

Conclusion:

The GBP/USD pair is under significant pressure as it approaches key support levels amid broader market weakness and disappointing economic data. A sustained break below 1.28770 could trigger further declines towards 1.28607, 1.28361, and 1.28169. Conversely, if the support holds, a sideways trend may develop, with resistance levels at 1.29000 and the descending trendline in focus. Only a breakout above 1.29231 would indicate a potential shift to bullish sentiment.

Traders should closely monitor the UK’s CBI Business Optimism Index and US economic reports for further market direction. Staying attuned to these key events and technical levels will help navigate the current market environment effectively.