GBP/USD Sellers Strive to Maintain Market Control

Market Overview

As the New York market opened on Monday, the US dollar regained its strength against other major currencies. This resurgence is largely attributed to Donald Trump’s reappearance on the political stage, which has become a significant factor in the narrative for the dollar. His appointments in the Treasury, combined with promises of a growth-focused economic agenda, have provided support for US equities. However, these policies have created some headwinds for the dollar. Traders are carefully analyzing the balance between domestic growth policies and their effects on international trade dynamics.

Technical Analysis

On the 4-hour chart, the bearish trend remains dominant for the GBP/USD pair. The descending trendline overlaps with the midline of the Bollinger Bands, acting as a strong resistance that prevents price growth. Currently, the price is trading in the lower half of the Bollinger Bands following a bearish squeeze, with the bands widening and moving lower due to selling pressure. This configuration signals the market’s inclination towards a continued bearish move.

Presently, the price is approaching the 61.8% Fibonacci support level at 1.25325, which is a key level undergoing testing. If this level is breached, the next target would be a retest of the recent low at 1.24867. Additional downside targets are located at 1.24541, 1.24371, and 1.24127, respectively.

The Relative Strength Index (RSI) stands at 39.26, indicating the presence of selling pressure, though it has yet to enter the oversold territory. This RSI level confirms the sellers’ dominance and suggests potential for increased bearish momentum. The MACD oscillator also confirms the negative momentum, with both MACD lines positioned in the negative zone and the histogram trending downward in red. These conditions reaffirm the strength of selling forces in the market, making further downward movement more likely.

Alternative Scenario

Should the price manage to hold above the 61.8% Fibonacci level at 1.25325 and subsequently break through the descending trendline, there is potential for a shift towards an upside movement. In such a scenario, the price would aim for the upper Bollinger Band and target the next resistance at 1.26065. A sustained move above this level would indicate a change in trend from bearish to bullish.

Until the price decisively breaks above the trendline and the mid-Bollinger Band, the prevailing bias remains bearish. Continued selling pressure could lead the pair towards lower support levels, underscoring the importance of the current key technical zones.

Oscillators Confirmation

RSI: Positioned at 39.26, indicating selling pressure, with room for further bearish movement before reaching oversold conditions.

MACD: Negative territory with a downward sloping histogram, signaling sustained bearish momentum.

Moving Averages: Price remains below the descending trendline and the midline of the Bollinger Bands, confirming a bearish stance.

Key Support and Resistance Levels

Resistance Levels:

• 1.26065: Upper resistance, marking a potential trend reversal if surpassed.

Support Levels:

• 1.25325: Key support at the 61.8% Fibonacci retracement, currently being tested.
• 1.24867: Recent low that may be retested if bearish momentum continues.
• 1.24541, 1.24371, 1.24127: Sequential support levels, indicating deeper bearish targets if selling persists.

Key Events to Watch

Several events are expected to influence GBP/USD this week. Key data releases from the US include updates on economic activity and sentiment indicators, which could impact the dollar’s direction. Meanwhile, investors will closely monitor statements from the Federal Reserve and the Treasury regarding future monetary and fiscal policy actions.

For the UK, attention will be on the upcoming economic reports, particularly those related to growth and inflation, which will likely impact the pound’s trajectory. Given the political and economic backdrop, traders should stay vigilant for unexpected changes that could impact short-term market direction.

Conclusion

The GBP/USD pair remains under pressure as sellers continue to dominate. The next targets lie at key support levels, starting with 1.25325. Unless the price breaks above the descending trendline, the bearish trend is likely to persist.