True to the prior forecast, the GBPUSD pair failed to reclaim its six-month uptrend, pushing it to test the 1.34 support in late September. Despite the initial stability of this level, it was irreparably compromised two weeks later. The pair is now protected from a drop to summer lows only by the 200-day moving average (EMA 200), positioned just above 1.326.
Breaking 1.34 was a key event, especially since it coincided with the 23.6% Fibonacci retracement. With that support gone, the focus for sellers shifts to the next 38.2% Fibonacci at 1.314, a level that also matches the local lows seen in May and August. The technical picture confirms this downward bias, as the RSI is now falling without reaching oversold territory, and the MACD has just moved back below zero.
Yesterday’s GBPUSD sell-off took place despite hawkish rhetoric from the Bank of England's Catherine Mann. Traders largely dismissed her calls to maintain high interest rates to combat inflation. Instead, they are paying their attention to the upcoming 2026 budget plan, which is due on November 26. Experts polled by Reuters predict spending cuts of £25–30 billion and further tax hikes. This expectation has already weighed on the pound, darkening the UK's economic prospects.
Difficult budget negotiations are also underway across the Atlantic between Republicans and Democrats, yet the US dollar is not being significantly exposed. According to Bloomberg analysts, Forex participants have overextended their positions by betting against the greenback. Nevertheless, as the political clout of the yen and euro diminishes due to shifts in Japan and France, capital is flowing back to the American currency. The need to hold dollars in order to participate in the ongoing US stock market rally is further fueling this trend.
The following trading strategy may come into play:
Sell GBPUSD at or below 1.34. Take profit: 1.314. Stop loss: 1.35.
This content is for informational purposes only and is not intended to be investing advice.
