GBP/USD is trading within its December opening range, retreating after starting the week on a positive note. The pair faces challenges as it struggles to climb back above the 200-day Simple Moving Average (SMA) at 1.2822, raising concerns about a potential bearish trend.
A Critical Moment for GBP/USD
The British pound dipped below the 200-day SMA for the first time since May following the US election. This break suggests that GBP/USD may no longer follow the bullish trend seen earlier this year. The flattening slope of the SMA adds to the outlook of a weaker pound.
The pair risks further declines if it fails to stay within the ascending channel carried over from last month. However, a move above the December opening range could negate bearish signals and spark a recovery. A sustained break above 1.2822 might pave the way for further gains, while a failure to hold key support levels could send the pair lower.
Key Levels to Watch
- Support Levels: GBP/USD risks testing the monthly low at 1.2617 if it breaks below the 1.2710–1.2760 zone. A further drop could bring 1.2540 into focus, with the November low of 1.2487 and the 1.2390–1.2446 zone (May low) as additional downside targets.
- Resistance Levels:
A breach of 1.2820 could signal the end of bearish momentum. Breaking above the 1.2900–1.2910 region would open the door to test the 1.3000–1.3010 zone, suggesting a potential return to a more positive outlook.
The Bigger Picture
The pair’s trajectory depends heavily on its ability to hold within the December range. A failure to do so could reinforce bearish trends, while a push above the range would signal a possible reversal. Traders will also watch for broader market trends and US dollar strength, which could further influence the pound’s movement.
