In the early European session on Friday, the GBP/USD pair is trading with slight gains around the 1.2520 level. Despite this move, the overall outlook for the currency pair remains bearish, particularly as it continues to trade below the 100-day Exponential Moving Average (EMA), coupled with a bearish reading from the Relative Strength Index (RSI).
Current market sentiment is somewhat muted due to low trading volumes, alongside a growing belief that the US Federal Reserve is less likely to implement substantial rate cuts in the coming year. The bearish trend is reflected on the daily chart, with GBP/USD holding beneath critical resistive levels which further emphasizes potential downward pressure. The RSI is positioned below the neutral midline at approximately 38.35, suggesting that the momentum is skewed towards continued downward movement.
Traders should pay attention to the initial support level at 1.2460, which corresponds to the lower boundary of the Bollinger Band. A breakdown below this level could catalyze a drop to 1.2331, marking the low recorded on April 23. Should the selling pressure intensify, the next significant level of support appears at 1.2187, based on the low from November 10.
On the other hand, for those looking for potential upside, immediate resistance is identified at 1.2614, the high observed on December 20. Should the price rally further, the next resistance level is noted at 1.2728, while a crucial area to monitor would be the 1.2810-1.2820 zone, which includes the 100-day EMA and the upper limit of the Bollinger Band.
