Drop below 200-DMA, at intersection of downward trend resumption

• GBP/USD fell 0.36% from its daily high on signs of rising US inflation.
• It is struggling above the 200-day moving average of 1.2564, suggesting further decline is possible.
• The support level is found at the high of 1.2506 on November 14, 2023. A violation of this could lead to a further test of support at 1.2448 and the year-to-date low of 1.2299.
• A recovery above the 200-DMA could reignite the bullish momentum targeting 1.2600, with additional resistance at the 50-DMA and 100-DMA at 1.2619 and 1.2645.

The pound is showing a downward trend against the US dollar after expanding beyond the 200-day moving average (DMA). However, data from the United States (US) showing inflation could be rising, as shown by the Employment Cost Index (ECI), lifted the dollar. GBP/USD is therefore trading at 1.2517, down about 0.36% after hitting a daily high of 1.2563.

GBP/USD Price Analysis: Technical Outlook

GBP/USD is showing a neutral bias, but failure to stay above the 200-DMA at 1.2564 could open the door to a decline, with traders expecting a test of the high of 1.2506 on November 14, 2023. A decline below this level would see further declines at the intermediate support of 1.2448 on April 26 before the key support fell to the year-to-date (YTD) low of 1.2299.

On the other hand, if the pair breaks above the 200-DMA, it opens the way for a test of 1.2600. Above this, a major resistance level appears. The 50-DMA was next up at 1.2619, followed by the 100-DMA at 1.2645. Subsequent gains appear above this level, worsening the rally towards 1.2700.

GBP/USD price action – daily chart