Technical analysis: Sterling/USD double bottom form worries, bearish outlook unchanged

On Monday (July 21), during the European session, the GBP/USD time-share chart showed that the price experienced a short-term rally and then retreated. The price peaked at around 1.3465 and is currently in a key shock area.

The GBP/USD exchange rate has recently come under significant downward pressure, with the latest decline to 1.3364, a new low since May 21, 2025, and a significant decrease from the year's high of 1.3788.

fundamental analysis

Last week, the Office for National Statistics (ONS) reported that the consumer price index (CPI) rose 3.6% year-on-year in June, higher than the median forecast of 3.4% and the highest level in 18 months. The inflation surge was driven by higher food and motor oil prices. However, the pound still failed to gain momentum and continued to decline.

Despite the strong data, the market's reaction to the pound was more negative, mainly due to the fact that the Bank of England (BoE) is likely to keep interest rates unchanged at its upcoming August meeting and delay further rate hikes.

The Bank of England is less likely to cut interest rates multiple times in 2025. Several Wall Street banks have already adjusted their expectations for a rate cut by the Bank of England in the face of an unexpectedly high consumer price index in June and weaker-than-expected three-month labour market data at the end of May.

At the same time, the dollar index was supported by strong US economic data, including better retail sales in June, an improvement in the unemployment rate to 4.1%, and inflation rising to 2.7%. The rise in the dollar index (DXY) further exacerbated the downward pressure on the GBP/USD.

Sentiment is also being influenced by the Fed's forthcoming statement. Fed chairperson Jerome Powell is expected to reiterate his caution on interest rate cuts in a speech on Tuesday, while Fed governor Michelle Bowman has previously expressed support for a modest 0.25% rate cut in July. These developments have supported the strengthening of the dollar, further putting pressure on the pound/dollar. Continued Brexit-related uncertainty and possible US policy adjustments by the Trump administration have also continued to weigh on the pound's performance.

At present, the focus of the market has turned to the policy stance that Federal Reserve Chairperson Jerome Powell will express in his speech on Tuesday.

technical analysis

(Hourly chart of GBP/USD, source: Easy Huitong)

On the hourly chart of GBP/USD, the pair showed a clear bearish trend after failing to stand above the 1.3600 range. The pair broke below the key pivot level of 1.3550, and then went on to break below 1.3500 and 1.3450 in a row, setting a low of 1.3364. The pair is currently consolidating its losses, with immediate resistance around 1.3475 and the key resistance at 1.3490, which is also the 50% Fibonacci retracement level of the recent decline from 1.3619 to 1.3364 in the downside band. If it breaks through 1.3490, the pair may advance towards 1.3520 (61.8% Fibonacci retracement level) and may even touch 1.3620.

On the downside, the connectivity bullish trendline at 1.3415 provides initial support, followed by the 1.3365 range. If it falls below 1.3350, the decline could accelerate, with the target pointing towards 1.3320 and possibly even down to 1.3250. The daily chart further confirms the bearish momentum: the pair fell below the lower rail of the ascending channel and the 50-day moving average, indicating that bears are dominant. Key oscillators such as MACD (exponential smoothing averages of similarities and differences) and RSI (relative strength indicator) are both moving downwards, strengthening the bearish outlook.

What needs to be paid attention to is the double bottom pattern formed at the level of 1.3371, with the neckline at 1.3783. If it clearly falls below 1.3371, this bullish pattern will expire, confirming that the pair may further decline to the level of 1.3300 or lower. On the contrary, if the rebound breaks through 1.3415, it may suggest a short-term correction, but the overall trend remains bearish, unless the pair recovers at 1.3490.

At 17:58 Beijing time, GBP/USD was trading at 1.3456/57, an increase of 0.37%.