Sterling remains confined within a 1.3143–1.3787 range established since late April, with recent price action tilting bearish as technical momentum fades. GBP/USD trades below its 21-DMA near 1.3498, signaling a loss of upward traction and vulnerability to a deeper correction.

Macro and Sentiment Overview

• UK Context: Gilt yields continue to correlate tightly with GBP/USD, but fiscal concerns and rising equity volatility (VIX up three consecutive weeks) could limit sterling’s haven appeal.
• Cross-Asset Link: Cable’s resilience has been partially supported by a positive correlation between EUR/GBP and U.S. equity volatility—a dynamic that may unwind as risk sentiment weakens.
• BoE Outlook: While inflation concerns linger, a dovish tone from key MPC members could undermine the currency further.

Technical Outlook

• Chart Pattern: A bearish crossover between the 21-DMA and 100-DMA near 1.3500 is forming, signaling potential medium-term weakness.
• Support Zones:
  • 1.3394 – intraday double-bottom support.
  • 1.3333/34 – dual September lows; break would confirm trend reversal.
  • 1.3250 – 50% retracement of 1.2712–1.3787.
• Resistance Zones:
  • 1.3498–1.3505 – converging MAs; key resistance to recapture.
  • 1.3527 – Oct 1 swing high.
  • 1.36 – breakout trigger if reclaimed.
• Indicators: RSI remains subdued, trending lower, and Bollinger Bands are narrowing, suggesting impending volatility expansion. MACD is flat but below zero, reinforcing downside bias.

Strategic View

Technically, GBP/USD faces mounting downside risk as long as it stays below 1.35. A decisive break beneath 1.3333 would accelerate selling toward 1.3250–1.3150. However, a surprise rally above 1.3527–1.36 would invalidate the bearish setup and shift focus to 1.3660.