GBPUSD testing support, breakout ahead?

The pound-dollar slipped below 1.335, hitting its lowest level in nearly two months, as traders grappled with persistent UK inflation and an uncertain BoE policy outlook. Adding to the tension, MPC members expressed divergent views: BoE policymaker Greene warned against near-term rate cuts, while Governor Bailey maintained that further easing may still be necessary.

Domestic politics also weighed on sentiment. Greater Manchester Mayor Burnham's push to renationalize key services and issue 40 bln GBP in borrowing for housing unsettled investors already wary of sluggish demand in recent gilt auctions.

Meanwhile, stronger-than-expected US 2Q GDP bolstered the dollar, further pressuring the pound. The pound-dollar pair faces continued downside risks with gilt markets remaining fragile and the US dollar firm. Upcoming data releases next week may fuel further volatility.

From a technical perspective, GBPUSD is testing the ascending channel's lower bound, which coincides with support at 1.3320. Breaking this level may place the pair under further pressure, with the potential for a decline toward the support at 1.3100. Ichimoku Cloud is also showing signs of bearish pressure, as the price sustains below this indicator. Conversely, a rebound above 1.3320 may prompt a retest of the resistance at 1.3650.

By Li Xing Gan, Financial Markets Strategist Consultant to Exness