The GBP/USD pair climbed to near 1.2690 in Wednesday’s early European session, trading in positive territory for the second consecutive day. However, the pair’s potential upside appears constrained, with the US Dollar (USD) remaining resilient due to expectations of a less aggressive rate cut by the Federal Reserve and concerns over President-elect Donald Trump’s tariff policies. Traders await Federal Reserve Chair Jerome Powell’s speech for further clarity on the interest rate outlook.
Despite the recent recovery, the bearish outlook for GBP/USD remains intact. The pair continues to trade below the critical 100-day Exponential Moving Average (EMA), and the 14-day Relative Strength Index (RSI) is capped below the midline at 45.35. This technical setup suggests limited upward momentum and the potential for further downside pressure in the near term.
On the downside, the key psychological support level for GBP/USD is at 1.2600. A break below this level could open the door to further losses, with the next targets at 1.2467, the lower Bollinger Band, and 1.2331, marking the low of April 23. These levels could act as significant barriers against a deeper decline.
In the event of a bullish breakout, 1.2750 serves as the first resistance level, with additional gains potentially extending to 1.2875, aligned with the 100-day EMA. Beyond this, 1.2920, the upper Bollinger Band, acts as the next key resistance. However, sustained momentum is necessary to challenge these levels, keeping the pair’s immediate outlook cautious.