GBP/USD Price Analysis: Bearish Momentum Persists with Key Support at 1.2560

GBP/USD remains under pressure, trading near 1.2700 in the early European session on Monday. The pair has faced consistent selling pressure in recent days, failing to establish a foothold above crucial resistance levels. The current trajectory highlights a bearish sentiment, especially as the pair trades below its 100-day Exponential Moving Average (EMA) with a negative Relative Strength Index (RSI) indicator.

Key Technical Levels and Market Sentiment

GBP/USD has been struggling to regain bullish momentum, with several technical indicators pointing to further downside risks. The immediate downside target is the psychological level of 1.2600, a critical support zone for the pair. On the upside, resistance is seen at 1.2834, a level that needs to be cleared decisively to shift the bearish narrative.

Previous Movements and Current Outlook

Last week, GBP/USD reached the pivotal support level of 1.2560, which aligns with the ascending trendline from the 2023 lows. This level had been a key target following the breakdown from 1.2850 earlier in the month. As expected, buyers emerged around this zone, leading to a modest bounce.

However, the relief rally has proven short-lived. Monday's trading session saw GBP/USD attempting to recover but struggling to sustain momentum above the 1.2650 region. This fading rally underscores the pair’s vulnerability as sellers continue to dominate.

Bearish Indicators and Market Dynamics

The bearish sentiment surrounding GBP/USD is rooted in a combination of technical and macroeconomic factors:

Bearish RSI and 100-day EMA:

GBP/USD remains entrenched below the 100-day EMA, signaling ongoing selling pressure. The bearish RSI adds further weight to the negative outlook, as momentum indicators fail to show signs of recovery.

Key Resistance at 1.2834:

For GBP/USD to stage a meaningful recovery, it would need to break above 1.2834 convincingly. This level represents a critical barrier, and failure to breach it could invite additional downside pressure.

Critical Support at 1.2560:

The 1.2560 level has acted as a significant pivot point. A sustained move below this support could open the door to further declines, potentially targeting the 1.2500 handle.

Potential Scenarios

Bearish Continuation:

If GBP/USD fails to hold above 1.2560, the next leg lower could extend toward the 1.2500 psychological level. The broader downtrend would remain intact unless there is a strong reversal above resistance levels.

Relief Rally:

Should GBP/USD maintain support at 1.2560 and manage a recovery above 1.2650, a temporary relief rally could push the pair higher. However, as the bearish indicators persist, any upside move is likely to face resistance near 1.2700–1.2750.

Fundamental Factors Influencing GBP/USD

The GBP/USD pair’s movements are not solely dictated by technical factors. Several macroeconomic themes are in play:

Weak UK Economic Data:

The UK economy has shown signs of slowing, with recent data painting a mixed picture of growth prospects. Weaker-than-expected GDP growth and subdued inflation pressures have weighed on the British pound.

Divergence in Monetary Policy:

The US Federal Reserve's relatively hawkish stance compared to the Bank of England (BoE) adds pressure to GBP/USD. While the Fed remains open to further tightening, the BoE appears cautious amid concerns about stalling economic activity.

Global Risk Sentiment:

Risk sentiment has also played a role in driving GBP/USD lower. Safe-haven demand for the US dollar has increased amid global uncertainties, making it harder for the pound to stage a recovery.

Outlook for GBP/USD

The outlook for GBP/USD remains tilted to the downside, given the current technical and macroeconomic backdrop. The pair is likely to face further headwinds unless it can decisively reclaim critical resistance levels and show a sustained bullish momentum.

In the near term, traders will focus on how GBP/USD behaves around the 1.2560 support level. A break below this level would signal deeper declines, while a hold above it could pave the way for a short-term recovery toward 1.2650.

Conclusion

GBP/USD continues to struggle in bearish territory as it trades near 1.2700. With the pair facing stiff resistance and bearish technical indicators, the outlook remains negative. The psychological levels of 1.2600 and 1.2560 are crucial support zones to watch. However, without a significant shift in sentiment or fundamental factors, the GBP/USD pair may continue to face challenges in mounting a sustained recovery.

Traders should remain cautious, keeping an eye on key levels and macroeconomic developments that could impact the pound’s trajectory in the coming days.