GBP/USD shows a decline, trading at approximately 1.3485 during the early European session on Monday. The favorable perspective for the pair remains intact as the price sustains its position above the crucial 100-day EMA. The initial support level is identified at 1.3393, while the primary resistance level to monitor is 1.3547. The GBP/USD pair experiences a decline in momentum around 1.3485 in the early European session on Monday, influenced by a resurgence in demand for the US Dollar. The potential downside for a major pair appears constrained, given that the Bank of England indicated that monetary policy will continue on a gradual downward trajectory.
The BoE’s Monetary Policy Committee has opted to reduce its benchmark interest rate by a quarter point to 3.75% during its December meeting, marking the first reduction since last August. During the press conference, Governor Andrew Bailey indicated that rates are expected to follow a gradual downward trajectory, but he noted that “how much further we go becomes a closer call” with each reduction. Traders are projecting two rate cuts from the US Federal Reserve (Fed) in 2026, influenced by a cooling labor market and easing inflation. The financial markets are currently reflecting approximately an 18.3% probability that the US central bank will lower interest rates during its upcoming policy meeting in January, as indicated. The expectation of a dovish stance from the Fed may exert downward pressure on the Greenback, potentially providing support for the pair in the short term.
On the daily chart, GBP/USD is currently positioned at 1.3486. The 100-day EMA is trending upwards, and the price remains above it, maintaining the medium-term upward trajectory. A pullback would encounter dynamic support at this average, maintaining the overall bias. The RSI is currently at 66, indicating a bullish stance after a slight decline from recent peaks, suggesting solid momentum without signaling overbought conditions. Initial support is positioned at the Bollinger middle band at 1.3393, while the 100-day EMA is located below at 1.3336. Maintaining a position above this zone would limit declines and favor upward movement.
Bollinger Bands are trending upward, with the price firmly situated in the upper half and nearing the upper band at 1.3547, reflecting ongoing bullish momentum without being overextended. The bands have shown a slight expansion in recent sessions, indicating strong momentum. A close above that barrier would indicate potential for further movement, whereas a rejection would suggest a possibility for consolidation towards the lower band at 1.3240.