Current Price Action: GBP/USD is currently trading at 1.2702, showing a decline of 0.6% during the New York afternoon session. The pair has reached a new low of 1.2670, demonstrating significant bearish momentum.

Key Technical Levels:

• Support Levels:
  • The daily cloud top at 1.2725
  • The 100-Day Moving Average (DMA) at 1.2680
  • The 200-Day Moving Average (DMA) at 1.2645
  • The daily cloud base at 1.2585
• Resistance Levels:
  • The 50-Hour Moving Average (HMA) at 1.2755
  • Tuesday's high at 1.2803
  • The 50% retracement level of the move from 1.3000 to 1.2672 at 1.2848

Fundamental Analysis

Market Sentiment: The recent decline in GBP/USD is primarily driven by concerns over global economic growth and a shift in market sentiment regarding the Bank of England's (BoE) future policy actions. The sterling has been in a downward trend since reaching a 2024 high of 1.3044 on July 17, coinciding with the Federal Reserve's dovish stance ahead of its July 31 decision to hold rates.

Bank of England Policy: Dovish tones from the BoE have intensified, especially following the rate cut on August 1. Despite the BoE's attempts to manage market expectations by emphasizing data dependence and cautioning against rate speculation, recent comments from BoE's Governor Bailey have signaled that future forecasts are based on the current market curve, which suggests lower rates.

Impact of Speculative Positions: The significant speculative long positions in sterling, recorded at 142,183 contracts as of July 23, are now unwinding, adding further downward pressure on the GBP/USD pair. The breach of key technical supports, such as the daily cloud top at 1.2700 and the 100-DMA at 1.2680, supports a bearish outlook. The pair may test additional support levels, including the 200-DMA at 1.2655 and the daily cloud base at 1.2579.

Interest Rate Expectations: The ongoing concerns about global growth and the BoE's potential rate cuts are key determinants of GBP/USD's price action. As the likelihood of Fed rate cuts decreases, the high-beta sterling remains vulnerable to further declines if economic growth continues to falter, prompting more dovish expectations from the BoE.

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