GBP/USD Price Forecast: Bears flirt with monthly low, near 1.3480-1.3470 confluence

GBP/USD attracts fresh sellers on Monday amid a strong pickup in USD demand.
The downside seems cushioned as traders await Fed and BoE decisions this week.
Bears need to wait for a convincing break below the 1.3480-1.3470 support zone.

Haresh Menghani FXStreet

The GBP/USD pair comes under heavy selling at the start of a new week and drops to the lower end of its monthly range, near the 1.3480 region during the first half of the European session. The intraday decline is sponsored by a broadly firmer US Dollar (USD), though bearish traders might refrain from placing aggressive bets ahead of key central bank events this week.

The US Federal Reserve (Fed) is scheduled to announce its decision at the end of a two-day policy meeting on Wednesday, which will be followed by the Bank of England (BoE) meeting on Thursday. The market focus, meanwhile, would be on central banks' policy outlook, which, in turn, would provide some meaningful impetus to the GBP/USD pair and help in determining the next leg of a directional move.

From a technical perspective, the 1.3480-1.3470 area represents a confluence support – comprising the 50% Fibonacci retracement level of the July-August upswing and the 100-day Exponential Moving Average (EMA). A convincing break below will be seen as a fresh trigger for bearish traders and pave the way for an extension of the GBP/USD pair's recent pullback from an over six-month high, touched in August.

Meanwhile, the Moving Average Convergence Divergence (MACD) is slipping modestly below zero, and the Relative Strength Index (RSI) is easing toward a neutral 44, hinting that bullish momentum has moderated rather than fully reversed. Hence, a break and acceptance below the aforementioned confluence is needed to back the case for a further near-term depreciating move for the GBP/USD pair.

This is followed by deeper Fibonacci floors at 1.3420 (61.8%), 1.3352 (78.6%), and the cycle low near 1.3265 if sellers regain control. On the topside, initial resistance emerges at the 38.2% retracement at 1.3516, ahead of the 23.6% level at 1.3575, while a sustained break above these barriers would open the way toward the broader structural high near 1.3671.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

GBP/USD daily chart

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

How often does the Fed hold monetary policy meetings?

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

What is Quantitative Easing (QE) and how does it impact USD?

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

What is Quantitative Tightening (QT) and how does it impact the US Dollar?

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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