GBP/USD Under Pressure, but Fed Hold Expectations Limit Bearish Outlook

Traders' Opinions

Summary:

GBP/USD falls toward 1.3675 as sticky US PCE inflation supports the Dollar and keeps another Fed hike in play. However, with September hike expectations still relatively modest, the Pound’s decline may remain corrective rather than signal a broader bearish reversal.

SELL GBPUSD

EXP

TRADING

1.35790

Entry Price

1.33000

1.37000

1.35908 -0.00009 -0.01%

0.0

Pips

Flat

1.33000

Exit Price

1.35790

Entry Price

1.37000

The British Pound remains under pressure against the US Dollar on Thursday, with GBP/USD sliding toward 1.3675 and touching its weakest level in roughly a week. The decline extends Wednesday’s reversal and reflects renewed demand for the Greenback after US inflation proved more persistent than investors had anticipated.

The latest US PCE inflation report has strengthened the Dollar’s near-term position. Headline inflation held at 3.7% year-on-year in July, rather than moderating as expected, while the core measure remained elevated at 3.3%. Both readings are still comfortably above the Federal Reserve’s 2% objective, reinforcing the view that policymakers cannot afford to declare victory over inflation just yet.

For GBP/USD, the immediate problem is that sticky US inflation has reopened the debate over whether the Fed may need one additional rate increase. Markets currently assign roughly a 36% probability of a September hike, meaning investors are far from convinced that tightening is imminent, but the latest numbers have made aggressive Dollar selling increasingly difficult.

ING described Wednesday’s US releases as mixed, arguing that they provided some support to the Greenback without delivering a definitive answer over the September FOMC decision. The bank continues to favour a Fed hold on September 16, which would eventually leave scope for renewed Dollar weakness, although incoming economic data and Fed communication over the next few weeks will be crucial.

This leaves GBP/USD caught between near-term Dollar strength and lingering uncertainty surrounding the Fed’s next move. In my view, the current Pound weakness looks more like a USD-driven correction than a decisive deterioration in Sterling’s broader outlook. Unless US data consistently strengthens the case for another hike, selling pressure on GBP/USD could eventually begin to lose momentum.

Technical Analysis

GBP/USD has turned increasingly fragile on the 4-hour chart after the pair failed to sustain its breakout above the 1.3640–1.3670 resistance zone. Price briefly pushed beyond this major supply area but quickly lost momentum, creating what increasingly resembles a false breakout before falling back toward 1.3580.

More importantly, the latest decline has forced GBP/USD below the rising trendline that had guided the recovery from the late-July lows. That break represents the first meaningful deterioration in the recent bullish structure. The pair had previously maintained a consistent sequence of higher lows, but the rejection around 1.3670 followed by the trendline breakdown suggests that sellers are beginning to regain control.

The 1.3570–1.3580 region is now the immediate battleground. A sustained move below this area would confirm that the recent upside breakout has failed and could accelerate selling toward 1.3510, followed by the 1.3460–1.3470 area. If bearish momentum strengthens further, attention would shift toward 1.3380 and eventually the broader 1.3280–1.3300 region, which aligns with the downside path highlighted on the chart.

The bearish scenario would weaken if buyers quickly reclaim the broken trendline and push price back above 1.3640. However, the larger 1.3640–1.3670 supply zone remains the key invalidation area. Only a convincing 4-hour close above 1.3670 would restore the bullish structure and reopen the possibility of an extension toward 1.3725 and beyond.

For now, the combination of repeated rejection from major resistance, a failed breakout and the loss of rising trendline support shifts the near-term technical balance toward the downside. Any modest recovery into the broken support structure could therefore attract renewed selling pressure.

TRADE RECOMMENDATION

SELL GBP/USD

ENTRY PRICE: 1.3579

STOP LOSS: 1.3700

TAKE PROFIT: 1.3300

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GBP/USD Under Pressure, but Fed Hold Expectations Limit Bearish Outlook

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