Will the Loss of Key Support Trigger a Bullish Rebound?

Eva Chen

Summary:

Amid escalating Middle East risks and policy uncertainties, the pound has fallen below the 1.3300 threshold.

BUY GBPUSD

EXP

TRADING

1.33053

Entry Price

1.41000

1.30010

1.33644 -0.00387 -0.29%

0.0

Pips

Flat

1.30010

Exit Price

1.33053

Entry Price

1.41000

Fundamentals

On Tuesday, the GBPUSD accelerated its decline ahead of the New York session, breaking below the 1.3300 psychological level and poised to hit a three-month low. The core driver behind the currency's weakness was the renewed escalation of geopolitical risks. The ongoing escalation of the Iran conflict pushed oil prices higher, significantly boosting global risk aversion. The dollar strengthened as capital flowed back into the currency, while the pound, with its relatively higher yield profile, came under pressure.

From a fundamental perspective, the Middle East situation has altered expectations for the UK's monetary policy path by transmitting inflationary pressures through energy prices. Previously, as food and commodity price increases slowed, markets had anticipated that the UK's headline inflation rate would likely fall back toward the 2% target in April, creating conditions for policy easing. However, the renewed rise in energy prices may disrupt this trajectory.

Against this backdrop, the Bank of England may opt to delay interest rate cuts in March. Policy makers may need to wait for clearer signs of slowing inflation in the services sector to offset input inflation pressures stemming from rising energy costs. Meanwhile, as a net energy importer, the UK will see its trade deficit widen amid persistently higher oil prices, weakening structural demand for the pound. To avoid further currency depreciation and amplified inflationary pressures, the central bank may adopt a more cautious tone in its policy communications.

From a timing perspective, macroeconomic data released between now and the March 19 monetary policy meeting will be particularly crucial. This Thursday will see the publication of the Bank of England's Survey of Professional Forecasters, with its inflation expectations indicator holding significant reference value. Additionally, the latest UK Labour Market Report will be released on the morning of the March policy decision day (the central bank will receive the data in advance), while next week's preliminary February CPI figures will also provide important guidance for the policy path.

Overall, the pound currently faces dual pressures from rising external risk premiums and internal policy uncertainties. Should risk aversion continue to dominate the market and inflation data fail to show a significant decline, the GBPUSD may remain weak in the near term.

Will the Loss of Key Support Trigger a Bullish Rebound?_1

Technical Analysis

The GBPUSD is showing a downward bias in intraday trading, with the decline from 1.3867 continuing. The break below the structural support level at 1.3342 indicates that the pair has begun to retrace gains made since 1.2099. Under these circumstances, prices may extend lower toward the demand zone at 1.3222. For now, as long as the 1.3574 resistance level holds, any rebound will maintain its downside risk.

However, from a trading perspective, stabilization in demand zones may drive the market to continue its upward trend. Positioning is key.

Trading Recommendations

Trading Direction: Buy

Entry Price: 1.3230

Target Price: 1.4100

Stop Loss: 1.3001

Valid Until: April 2, 2026 23:55:00

Support: 1.3226, 1.3180, 1.3138

Resistance: 1.3338, 1.3445, 1.3575

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