The GBP/USD pair has modestly risen to 1.2550, with low trading volumes dominating the market this week as traders prepare for the upcoming Christmas holidays. The pair has been consolidating, showing limited price movement as the market adjusts to the quiet holiday period. Similarly, the US Dollar Index (DXY) remains flat, hovering just above 108.00, with little significant movement as investors await further economic data.
In the broader context, the US Dollar continues to hold a strong position. The Greenback is supported by expectations that the Federal Reserve will slow the pace of interest rate cuts in the coming year. Fed officials have adopted a more cautious stance on rate reductions, influenced by a slower-than-expected disinflation process and uncertainties surrounding policies under President-elect Donald Trump. Recent Fed projections suggest the federal funds rate could decline to 3.9% by the end of 2025, indicating a series of rate cuts next year, though fewer than markets had previously anticipated.
Looking ahead, the economic calendar includes Thursday’s release of Initial Jobless Claims data, with expectations for a slight decline to 218K new claims. This could introduce some volatility for the US Dollar. However, the Pound remains vulnerable, having fallen below the key upward-sloping trendline at around 1.2600, indicating potential for further downside. Traders will also be closely watching December’s Nonfarm Payrolls report, set for release in early January.
GBP/USD Technical Outlook
The GBP/USD pair is facing significant downside pressure. The Relative Strength Index (RSI) has dropped below 40.00, which increases the likelihood of further bearish momentum if it stays below this level. Additionally, the Moving Average Convergence Divergence (MACD) is showing red bars, suggesting a dominant bearish presence.
On the downside, the next support level for GBP/USD is around 1.2300. On the upside, if the pair can recover the 1.2600 mark, it may signal a potential recovery, making this level crucial for any signs of upward momentum.
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