GBPUSD struggles to regain momentum as uptrend breaks

At the end of last week, the GBPUSD currency pair broke below its six-month upward trendline from above. A similar case happened in early April, when prices reclaimed the level in just three trading sessions. That breakout proved false, but the current situation is sharply different. The active phase of the pound’s decline against the dollar has paused, but there are no clear signs of strong buying pressure from the bulls. Given this, after a brief consolidation, the price could easily resume its drop toward the 1.324 level.

According to Bank of America analysts, the large-scale decline of the US dollar has not yet exhausted its full downside potential. However, most factors currently point to an upward rebound. Their assessment suggests that market participants are unlikely to resume aggressive selling of the US currency at least until autumn. The bank’s experts believe that the Fed’s persistently high interest rates will ultimately outweigh the negative impact of Donald Trump’s import tariffs.

UBS analysts share a similar point of view, expecting the dollar index to stabilize around current levels through the end of summer. Meanwhile, the greenback could continue to strengthen against the pound. UBS cites the UK government’s fiscal policy as the key risk for the sterling. In the near term, the downward pressure on the pound doesn’t appear too concerning, but this effect is likely to intensify over time.

The British currency faces additional headwinds as the labor market weakens. Fresh data from the Office for National Statistics shows the UK economy lost 41,000 jobs in June, while vacancies plummeted to 727,000, the lowest level since the COVID pandemic. Meanwhile, unemployment climbed to 4.7%, hitting a four-year high. The data bolsters expectations that the Bank of England will cut interest rates at its August 7 meeting, further weighing on GBPUSD.

The technical indicators on the GBPUSD daily chart are showing oversold conditions. While the bears prepare for another downward push, it may be a good opportunity to gradually add to short positions.

Consider the following trading strategy:

Sell GBPUSD in the range of 1.34–1.35. Take profit – 1.324. Stop loss – 1.36.