The GBP/USD pair traded lower at 1.3685 during Tuesday’s European session, pressured by mounting political risk in the United Kingdom and growing expectations of near-term Bank of England (BoE) rate cuts.
Support is visible near 1.3600, the 50% Fibonacci retracement of the January upswing. This level now serves as a key pivot for traders seeking to gauge potential stabilization. The recent breakdown below the 100-hour Simple Moving Average (SMA) has reinforced bearish sentiment, while technical indicators signal caution.
The MACD remains below the zero line, with the MACD line under the signal line and a contracting histogram, indicating weak downward momentum. The RSI sits near 32, close to the oversold threshold, suggesting the downside may be stretched but not exhausted. A breach of the 61.8% Fibonacci retracement at 1.3548 could trigger deeper losses, whereas stabilization above mid-range support may allow a modest rebound.
Political headlines weighed on Sterling. Downing Street Chief of Staff Morgan McSweeney resigned, taking responsibility for advising Prime Minister Keir Starmer on appointing Jeffrey Epstein-linked Peter Mandelson as U.S. ambassador, fueling concerns over governance and decision-making.
USD pressured ahead of economic releases
The U.S. Dollar is also under mild pressure as traders await key economic reports delayed by the recent partial government shutdown.
- January Nonfarm Payrolls are forecast to increase by 70,000
- Unemployment Rate expected to remain at 4.4%
- Consumer Price Index (CPI) for January scheduled for Friday
Market participants are pricing in a likely Fed hold in March, with potential rate cuts in June and September. Comments from Fed officials indicate careful navigation ahead:
- San Francisco Fed President Mary Daly highlighted a low-hiring, low-firing economic phase.
- Fed Governor Phillip Jefferson emphasized data-driven policy decisions and gradual labor market stabilization.
- Atlanta Fed President Raphael Bostic warned that persistent inflation remains a key concern.
Technical outlook for GBP/USD
The technical picture points to fragile recovery attempts:
- Support: 1.3600 (50% Fibonacci retracement)
- Downside warning: 1.3548 (61.8% Fibonacci retracement)
- Resistance: 100-period SMA, now declining, may limit upward moves
Overall, the combination of UK political uncertainty, BoE rate cut bets, and a cautious USD ahead of U.S. jobs and inflation data has created a delicate environment for traders. While oversold conditions hint at a potential rebound, the downward SMA trend suggests any recovery could remain limited unless key support holds.
GBP/USD remains under watch, with traders balancing short-term technical signals against evolving political and economic developments.