The GBP/USD pair has experienced significant selling pressure for five consecutive days, plunging to its lowest level since November 2023, hovering around 1.2125 during Monday’s trading in Asia. This decline reflects ongoing concerns about stagflation and the UK’s fiscal stability, placing the British pound under substantial strain. The landscape is further complicated by a strong US dollar, which has been supported by rising expectations that the Federal Reserve will maintain its current interest rate stance rather than embark on further cuts.
Market participants are increasingly anxious about the prospects of stagflation in the UK. These concerns, coupled with worries regarding the nation’s fiscal health, have led to the GBP’s underperformance relative to other currencies. The bullish sentiment surrounding the US Dollar amplifies this situation, confirming a bearish outlook for the GBP/USD exchange rate.
From a technical standpoint, the Relative Strength Index (RSI) on the daily chart has dipped below the critical level of 30, suggesting an oversold condition. Traders may want to exercise caution, awaiting a potential period of consolidation or a slight recovery before considering further bearish positions. If a rebound occurs, resistance is likely to be encountered near the 1.2200 level. Any significant buying activity that pushes beyond the 1.2210 level could activate short-covering momentum and provide some upward movement.
Should the GBP/USD manage to break above 1.2200, it could aim for the next target range of 1.2245 – 1.2250 before attempting to reclaim the pivotal 1.2300 level. However, the prevailing downward trend persists, with the potential for the exchange rate to challenge levels below 1.2100. If prices drop below this critical support, a further decline towards the October 2023 low around 1.2035, and possibly down to the psychological 1.2000 level, could be expected.
