GBP/USD Extends Decline as Fed Caution and UK Inflation Weigh on Pound

The Fed cut its interest rate to 3.75–4.00%, but Powell hinted at the possibility of maintaining the current policy in December, disappointing investors who had anticipated another cut later this year. He noted that several FOMC members believe it’s time to pause and assess conditions before easing further. As a result, the CME FedWatch Tool shows that expectations for a December rate cut dropped from 90% to 67%.

Meanwhile, President Trump announced that trade issues with China had been resolved, giving the dollar an additional boost. Following his meeting with Chinese President Xi Jinping, Trump confirmed that Beijing will continue supplying rare earth metals to the U.S. and expand agricultural imports while combating fentanyl production. In return, Washington will reduce tariffs on Chinese exports by 10%, bringing them to 47%.

The pound remains under pressure following weaker September inflation data: the CPI came in at 0.0% month-on-month and 3.8% year-on-year, below the 4.0% forecast, which could prompt the Bank of England to lower rates soon. Traders now see a 75% probability of a rate cut. Additionally, concerns over higher taxes in the upcoming budget add to downside risks for the UK economy.

Overall, medium-term fundamentals continue to favor a decline in GBP/USD.

Support and Resistance Levels

The pair has exited its upward channel and is testing 1.3184 (Murray [0/8], 38.2% Fibonacci correction). A breakdown would open the way to 1.3062 (Murray [–2/8]) and 1.2975 (50.0% Fibonacci). The key resistance for bulls lies at 1.3367 (Murray [3/8]), supported by the middle Bollinger Band. A move above this level would allow a recovery toward 1.3550 (Murray [6/8]) and 1.3672 (Murray [8/8]).

Technical indicators suggest further downside potential: Bollinger Bands are turning lower, MACD is deepening in the negative zone, and the Stochastic oscillator is flat near the oversold area.

Resistance levels: 1.3367, 1.3550, 1.3672.

Support levels: 1.3184, 1.3062, 1.2975.

Trading Scenarios and GBP/USD Forecast

Short positions can be opened below 1.3184 with targets at 1.3062 and 1.2975, and a stop-loss at 1.3280. Timeframe: 5–7 days.

Long positions may be considered above 1.3367 with targets at 1.3550 and 1.3672, and a stop-loss at 1.3260.