- GBP/USD has dropped below 1.30 following weak data and BOE dovishness.
- It is challenging a two-month-old uptrend support line.
- Downside momentum and the loss of the 50 SMA point to further falls.
Break or bounce? That is the question for the long-term pound/dollar traders who are eying the daily chart. GBP/USD has hit the uptrend support line for the fourth time – making line it even more significant. It has accompanied the currency pair since mid-November.
Weak Gross Domestic Product hit sterling for November, which showed a contraction of 0.3% against 0% expected. The Bank of England's fresh openness to cutting interest rates – coming before the data – also weighs.
Back to the chart, the bearish case relies on the loss of the 50-day Simple Moving Average. Moreover, downside momentum has deepened. Support awaits at 1.29, a round number that cushioned the pair in December, and 1.2820, which provided support in November.
The most significant support line is at 1.2775, which is the November low and also where the 200-day SMA meets the price.
The bullish case rests with the fact that GBP/USD is holding onto this uptrend support line – at least for now – and that it is trading well above the 100 and 200-day SMAs.
Resistance awaits at 1.3105, which is where the downtrend resistance line hits the price. Next, we find 1.3205 and 1.3285, both recent peaks that form the trending cap: higher above, the election peaks of 1.3420 and 1.3510 tower above.
The next significant release is UK Consumer Price Index, due out on Wednesday at 9:30 GMT.
See UK inflation Preview: Cementing the rate cut or triggering a GBP/USD correction? Three scenarios
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