- GBP/USD trades slightly above 1.3400 in the European morning on Monday.
- The USD gathers strength after the EU and the US reached a framework trade deal.
- The pair could extend its slide in case 1.3400 support fails.
After posting large losses on Thursday and Friday, GBP/USD struggles to stage a rebound on Monday and trades in negative territory, slightly above 1.3400. The pair’s technical outlook suggests that the bearish bias remains intact in the short term.
The US Dollar (USD) outperforms its rivals as fears over an economic downturn in the United States (US) ease. The European Union (EU) and the US announced over the weekend that they have reached a framework trade deal that sets a blanket 15% tariff on goods traded between them. Additionally, European Commission President Ursula von der Leyen noted that they will not impose retaliatory tariffs and said they will invest $600 billion in the US on top of existing expenditures.
Furthermore, the South China Morning Post (SCMP) reported that the US and China are expected to extend their tariff truce by another three months ahead of US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng’s scheduled meeting in Stockholm on Monday.
Despite the broad-based USD strength, however, GBP/USD’s downside remains limited. The EU-US trade agreement seems to be causing the Euro to weaken, with investors reassessing the possibility of one more European Central Bank (ECB) rate cut this year. Hence, the sharp decline seen in the EUR/GBP cross suggests that Pound Sterling captures capital outflows out of the Euro.
The economic calendar will not feature any high-tier data releases on n Monday. On Wednesday, the Federal Reserve (Fed) will announce monetary policy decisions.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 40, reflecting the bearish stance.
On the downside, 1.3400 (Fibonacci 61.8% retracement of the latest uptrend) aligns as the first support level before 1.3340 (100-day SMA) and 1.3300 (Fibonacci 78.6% retracement). Looking north, resistance levels could be spotted at 1.3470 (Fibonacci 50% retracement), 1.3500 (100-period SMA) and 1.3540-1.3550 (Fibonacci 38.2% retracement, 200-period SMA
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