GBP/USD Slides Toward 1.3320 as Bearish Momentum Deepens and Volatility Compresses

GBP/USD Slides Toward 1.3320 as Bearish Momentum Deepens and Volatility Compresses

GBP/USD continues to struggle under sustained selling pressure, retreating sharply from its July high of 1.3789 to trade near 1.3400, with critical support at 1.3390 now under direct assault. The bearish correction has gained momentum as the pair trades below both the 20-day SMA at 1.3579 and the 50-day SMA at 1.3505. This loss of technical support signals that bulls are increasingly unable to defend higher levels. RSI on the daily sits near 39, hovering just above oversold territory, while ATR has compressed to 92–93 pips, hinting at a breakout environment. Should 1.3390 fail, the next projected supports lie at 1.3322, aligning with the ATR target, followed by 1.3272 at the 2.618 Fibonacci extension, then the 100-day SMA at 1.3281. Deeper breakdown exposes the 38.2% retracement of the YTD rally at 1.3144.

Sterling Cracks as UK Labour Data Stokes BoE Rate Cut Bets

UK macro data has added pressure to GBP/USD, particularly after ONS reported a jump in unemployment to 4.7% for May, the highest reading since 2021. This increase triggered a rise in rate cut expectations for the August BoE meeting, with market odds now climbing from 75% to 77%. The uptick in employment numbers limited Sterling’s decline against certain risk-sensitive currencies, but broader sentiment remains negative. The British pound now trades defensively, vulnerable to further disappointment amid a thinning domestic economic calendar. Without meaningful data releases from the UK ahead of the weekend, GBP remains reactive to U.S. flows and global sentiment.

U.S. Retail Sales and Consumer Sentiment Fuel Dollar Strength

The USD surged after a stronger-than-expected U.S. retail sales report. June’s figures came in at +0.6%, well above the 0.1% forecast and rebounding from -0.9% in May. The upbeat print reaffirms the resilience of U.S. consumption, giving the Fed greater confidence in delaying any policy easing. Eyes now shift to the University of Michigan consumer sentiment index for July, which is projected to rise again. If confirmed, it could further anchor U.S. yields and lift the greenback. GBP/USD faces headwinds from both the monetary policy divergence and macro data surprises favoring the dollar.

Technical Structure on GBP/USD Breaks Down as Reversal Candles Fail to Confirm

The technical profile for GBP/USD has deteriorated significantly. A failed breakout above the 1.3445 resistance zone earlier this week, combined with Thursday’s close below the rising channel, solidifies the short-term bearish bias. The presence of a Doji candle attempted to signal market hesitation, yet lack of follow-through buying invalidates any meaningful reversal. The weekly chart is even more concerning. Last week’s full-bodied red candle closed at session lows and built on a prior long-wick rejection from 1.3789, forming a textbook bearish continuation pattern. The current weekly candle lacks a lower wick, highlighting seller dominance and absence of bullish pushback.

GBP/USD Faces Critical Inflection at 1.3390 as Weekly Candle Builds Bearish Continuation

The 23.6% Fibonacci level at 1.3390, derived from the January-to-July rally, now represents the battleground for bulls and bears. Should this zone decisively break, the pair could cascade toward the 1.3299 zone—the 20-week SMA—then possibly the 1.3144 Fibonacci support. Weekly RSI has slipped to 57 from overbought conditions earlier in July, confirming loss of positive momentum. This trend structure gives bears a clear tactical edge unless Sterling can reclaim 1.3575 and break back above the 50-day average.

Macro Divergence Widening: Inflation Surprise in UK Fails to Rescue Sterling

The June UK CPI print rose to 3.6% YoY, beating May’s 3.4% and marking a 12-month high, while core inflation edged up to 3.7% from 3.5%. Yet despite the inflation surprise, markets largely shrugged off the data due to simultaneous signs of labor market softening and the Bank of England’s dovish tone. Investors viewed the CPI as less likely to stall policy easing than previous cycles. Meanwhile, U.S. macro prints including consumption and services data point to a far more resilient economic engine, further narrowing GBP’s appeal.

Verdict: SELL – Bearish Technicals, Policy Divergence, and Momentum Shift Align for Breakdown Toward 1.3140

The GBP/USD technical landscape has broken down below trend structures, while fundamental divergence between the Fed and BoE continues to widen. A break below 1.3390 increases probability of a rapid slide to 1.3270 and potentially to 1.3144 over coming sessions. The current macro backdrop supports USD strength, while the UK data calendar offers little to change sentiment. We rate GBP/USD a SELL, targeting lower levels unless bulls reclaim 1.3575 in the near term.

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