Local Resistance and BoE Cut Expectations Signal Possible Pullback

Summary:

This level saw the price rejected by the 200-period Moving Average (MA), leading to a decline toward the 1.3009 local low on November 4th.

Sell GBPUSD

EXP

PENDING

1.34500

ENTRY

1.32950

TGT

1.35200

-- -- --

Point

PENDING

1.32950

TGT

CLOSING

1.34500

ENTRY

1.35200

The latest data from the U.S. Bureau of Labor Statistics (BLS) presented a conflicting narrative: while the economy expanded its workforce beyond expectations in November, the unemployment rate simultaneously climbed to its highest level since 2021. Although the softening labor market provides a fundamental argument for further policy easing, market expectations for a rate cut in January 2026 remain subdued, hovering around 25% according to Capital Edge data.

Complementing this picture, delayed retail sales figures from the U.S. Census Bureau indicate that consumer spending remains relatively resilient, with sales figures holding steady through October. However, the report highlights that consumers are increasingly burdened by rising prices for essential goods, furniture, and various imported items—inflationary pressures largely attributed to the imposition of new tariffs.

Atlanta Fed President Raphael Bostic characterized the employment report as a "mixed bag" that does not fundamentally shift his outlook. He signaled a preference for holding rates steady during the Fed's most recent deliberations, noting that "multiple surveys" indicate rising input costs. According to Bostic, businesses are aggressively defending their profit margins by passing these costs on to consumers via higher prices. He warned that "price pressures are not stemming solely from tariffs" and cautioned that the Fed should not prematurely declare victory over inflation, even as he projects 2026 GDP to settle around 2.5%.

This cautious stance aligns with the Federal Reserve’s broader pivot. Last Wednesday, the Fed implemented a 25 basis point (bps) rate cut despite inflation lingering near 3%. The accompanying forward guidance was perhaps more impactful than the cut itself, as the central bank signaled an impending pause in the easing cycle. Chair Jerome Powell described this shift as a "wait-and-see" approach, suggesting that current rates sit at the upper bound of a neutral range. Having delivered 175 bps of total cuts, Powell asserted that policy is no longer "strongly restrictive."

Across the Atlantic, S&P Global data released on Tuesday showed surprising strength in the UK economy. The Composite PMI reached 52.1, outperforming both the previous 51.2 reading and market estimates. Specifically, the Services and Manufacturing PMIs climbed to 52.1 and 51.2, respectively, with both figures comfortably beating consensus. Despite this growth, the upside potential for the British Pound (Cable) may be capped by expectations of a Bank of England (BoE) move. Markets widely anticipate that the BoE will reduce its key interest rate by 25 bps to 3.75% during its December meeting. Local Resistance and BoE Cut Expectations Signal Possible Pullback_1

Local Resistance and BoE Cut Expectations Signal Possible Pullback_1

Technical Analysis

GBP/USD has encountered significant selling pressure at the 1.3455 level, a zone not tested since October 16th. Recently, this level saw the price rejected by the 200-period Moving Average (MA), leading to a decline toward the 1.3009 local low on November 4th. Following that bottom, the pair embarked on a sustained bullish rally, recently pushing the Relative Strength Index (RSI) into overbought territory. A failure to decisively break above this current resistance could trigger a bearish correction toward the 1.3293 support zone—a logical short-term target where price has previously found stability.

On the 4-hour chart, the 100 and 200-period Moving Averages are positioned at 1.3294 and 1.3207, respectively. The 100-period MA aligns almost perfectly with the immediate support area, significantly increasing the probability of a corrective move to this level. Furthermore, this zone coincides with the 0.50 and 0.618 Fibonacci Retracement levels of the most recent bullish leg. This confluence of technical indicators—overbought RSI, historical resistance, and Fibonacci support—favors a healthy pullback before any further upward movement.

Trading Recommendations

Trading direction: Sell

Entry price: 1.3450

Target price: 1.3295

Stop loss: 1.3520

Validity: Dec 26, 2025 15:00:00

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