GBP/USD Faces Downward Pressure Ahead of FOMC Minutes Release
Market Overview
The U.S. dollar extended its gains for the second consecutive session, exerting pressure on G10 currencies, including the British pound. As a result, the GBP/USD rally has stalled, with investors turning cautious ahead of the Federal Reserve’s meeting minutes release. Meanwhile, the latest UK inflation data continues to reflect a stagflationary environment, weighing further on the pound’s momentum.
With U.S. economic data remaining resilient and Fed officials maintaining a hawkish stance, the market is increasingly pricing in a prolonged period of higher interest rates, which has supported the dollar’s strength. Conversely, the UK’s economic outlook remains fragile, reinforcing the downside risks for GBP/USD.
Technical Analysis
On the four-hour chart, GBP/USD remains in a consolidation phase, trading within a tight range following a previous bullish rally. Price action suggests a squeeze formation at the recent peak, indicating that market indecision is building momentum for a potential breakout.
Currently, downside pressure has brought the pair toward support at 1.25819, which aligns with the lower bound of the consolidation range. A decisive breakdown below this key level would confirm a bearish move, exposing the pair to further declines toward 1.25661, 1.25461, and 1.25239.
Momentum indicators support this bearish scenario, with RSI retreating from the 70 level and approaching neutral territory, while MACD crosses below zero into negative momentum, confirming an increase in selling pressure.
However, if buyers reclaim control, a break above the 1.26399 resistance level could invalidate the bearish outlook and signal a potential resumption of the prior uptrend.
Key Technical Levels
- Resistance Levels: 1.26041, 1.26399
- Support Levels: 1.25819, 1.25661, 1.25461, 1.25239
Fundamental Drivers
FOMC Meeting Minutes: The release of the Federal Reserve’s minutes will be a key event, with traders looking for clues on interest rate guidance. Any confirmation of prolonged rate hikes could further strengthen the U.S. dollar.
U.S. Housing Data: Wednesday’s housing market reports, including existing home sales and mortgage applications, may provide additional insight into economic conditions in the U.S.
UK Stagflation Risks: The latest inflation figures suggest sluggish growth, raising concerns that economic stagnation and persistent price pressures could continue to weaken the pound.
Conclusion
GBP/USD remains under bearish pressure, with key support at 1.25819 acting as a critical level for sellers to extend losses toward 1.25661 and 1.25239. A break above 1.26399 would invalidate the downside scenario, shifting momentum in favor of buyers. The FOMC minutes remain the primary catalyst for market volatility in the upcoming session.
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