GBP/USD price recovery eyes key resistance at 1.2500 after 1.5% daily dip
GBP/USD recovers 1% after hitting multi-month low, faces key resistance at 1.2500
The GBP/USD currency pair began the year with a glaring 1.5% dip, reaching a multi-month low of 1.2360, close to the 1.2300 psychological support level last seen in April 2024.
This decline has been driven by persistent weakness in UK economic data and growing concerns over the fiscal policies of the newly elected Labour government. The Bank of England (BoE) has also contributed to the Pound's struggles with its dovish stance, including a split vote decision to leave interest rates unchanged in December.
As the GBP/USD pair continues to trade within a bearish channel since December 2024, the pair has seen a mild recovery of over 1%, driven by an oversold RSI that has bounced back and is now attempting to break above the 50 level. The recent recovery has seen GBP/USD move towards the 1.2500 mark during the early European session on January 6, 2025. This key psychological resistance level was a previous support level which has now become a hurdle for the Pound’s short-term outlook. Should GBP/USD fail to break above this level, it may realign its price movement with the broader downtrend.
GBP/USD price outlook: Final UK services PMI and Fed comments in focus
Traders are now eyeing the 1.2300 support level, last seen in April 2024, which remains crucial for the bearish outlook to hold. A break below this level could trigger further selling, pushing the pair toward even lower levels. However, if the pair manages to surpass 1.2500, it could signal a more sustained recovery.
Today, the market will be closely monitoring economic releases, including the final UK Services PMI later today, for signs of improving conditions or fresh catalysts that could influence the BoE’s stance. Fed Governor Lisa Cook’s speech later today could also provide further insight into the US interest rate trajectory, potentially influencing USD strength in the weeks ahead. As the situation unfolds, GBP/USD traders will be positioned at a crossroads, with technical levels and economic data providing the clues to the next major move.
The British pound hovers near 1.2440, aiming to extend its recovery against the US dollar.Markets remain focused on Fed Governor Lisa Cook's speech and upcoming US labor data.
