GBP/USD Price Forecast: Softens below 1.3500 but retains positive technical outlook
GBP/USD weakens to around 1.3485 in Monday’s early European session.
The positive outlook for the pair prevails as the price holds above the key 100-day EMA.
The initial support level is seen at 1.3393; the first upside barrier to watch is 1.3547.
The GBP/USD pair loses momentum near 1.3485 during the early European session on Monday, pressured by renewed US Dollar (USD) demand. The potential downside for a major pair might be limited, as the Bank of England (BoE) guided that monetary policy will remain on a gradual downward path.
The BoE’s Monetary Policy Committee decided to cut a quarter point in its benchmark interest rate to 3.75% at its December meeting, the first cut since last August. Governor Andrew Bailey said during the press conference that rates are likely to continue on a gradual downward path, but "how much further we go becomes a closer call" with each cut.
On the USD’s front, traders anticipate two rate cuts from the US Federal Reserve (Fed) in 2026 due to a cooling labor market and easing inflation. Financial markets are pricing in nearly an 18.3% odds that the US central bank will reduce the interest rates at its next policy meeting in January, according to the CME FedWatch tool. Firm Fed dovish bets could weigh on the Greenback and create a tailwind for the pair in the near term.
Technical Analysis:
In the daily chart, GBP/USD trades at 1.3486. The 100-day EMA edges higher and price holds above it, preserving the medium-term uptrend. A pullback would meet dynamic support at this average, keeping the broader bias intact. RSI sits at 66 (bullish) after easing from recent highs, pointing to firm momentum without an overbought signal. Initial support stands at the Bollinger middle band at 1.3393, with the 100-day EMA below at 1.3336. Holding above this zone would keep dips contained and the topside favored.
Bollinger Bands drift higher, with price entrenched in the upper half and approaching the upper band at 1.3547, indicating persistent bullish pressure while not overstretched. The bands have modestly widened in recent sessions, signaling firm momentum. A close above that barrier would open scope for an extension, while a rejection would leave room for consolidation toward the lower band at 1.3240.
(The technical analysis of this story was written with the help of an AI tool)
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