GBP/USD Forecast: Pound Sterling's recovery attempts could remain short-lived

GBP/USD trades at fresh multi-month lows below 1.2400.
The near-term technical outlook suggests that the bearish bias stays intact.
The Fed and the BoE will announce policy decisions later this week.

Eren Sengezer FXStreet

GBP/USD lost nearly 100 pips last week and continued to stretch lower during the Asian trading hours on Monday. The pair was last seen trading at its lowest level since early June at around 1.2370. Investors, however, could stay on the sidelines ahead of this week's key macroeconomic events and make it difficult for GBP/USD to make a decisive move in either direction in the near term.

The unabated US Dollar (USD) strength last week forced GBP/USD to stay under bearish pressure. Early Monday, US stock index futures trade modestly higher, pointing to a slight improvement in risk sentiment. In case risk flows gain traction in the second half of the day, GBP/USD could erase some of last week's losses.

On Wednesday, the UK's Office for National Statistics will release Consumer Price Index (CPI) data ahead of the Bank of England's (BoE) monetary policy announcements on Thursday.

According to the results of the BoE's quarterly conducted survey, 40% of UK public said it would be best for the economy if interest rates went down, the highest share since 2008. Furthermore, medium-term inflation expectations ticked down to 2.9% from 3% in the previous survey.

The Federal Reserve (Fed) will also release the interest rate decision alongside the revised Summary of Projections on Wednesday.

GBP/USD Technical Analysis

In case GBP/USD fails to stabilize above 1.2380 (mid-point of the descending regression channel), sellers could remain interested. In that scenario, 1.2330 (lower limit of the descending channel) aligns as next support before 1.2300 (psychological level).

On the upside, 1.2400 (upper limit of the descending channel) could be seen as first resistance ahead of 1.2440 (static level) and 1.2470 (50-period Simple Moving Average).

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Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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