GBP/USD Price Forecast: Drops Below 1.3400 as Bearish Momentum Persists Below 100-Day SMA

GBP/USD lost traction during early European trading on Monday, now trading near 1.33767, extending the bearish pattern below the 100-day SMA. The pair earlier slipped to the 1.3375 level, as the Federal Reserve's hawkish rate-hike stance last week continued to underpin the dollar against sterling.

**Dollar Strength Dominates Near-Term Direction**

The Fed raised its federal funds target range to 3.75%–4.00% last week, its first hike since 2023, and the hawkish tone kept the dollar well bid. Market reports indicate that with US rates near 3.88%, they have exceeded UK rates for the first time since October, with the rate differential further eroding sterling's appeal. According to derivatives pricing such as CME FedWatch, market expectations put the probability of a BoE hike this week at around 47%, rising to roughly 95% by December 17. However, even if the BoE follows suit, the pace of narrowing rate differentials remains insufficient to reverse dollar strength.

**Technical Outlook Bearish but Downside Needs Confirmation**

On the technical side, the pair remains bearish below 1.3550, with the stochastic RSI near 16, its weakest level since April. Support is seen at 1.3450 and 1.3400, with a break lower opening the path toward the area just above mid-August lows; resistance above sits at 1.3550, and only a break above 1.3600 would reopen upside room. The pair has already slipped below the 1.3400 threshold, but whether that level can be reclaimed effectively remains to be seen—otherwise, bearish momentum may persist.

**Focus on UK Data and BoE Decision**

This week, the UK releases employment, inflation, and retail sales data, with the BoE's rate decision on Thursday as the key event. Markets expect a 6–3 vote to hold rates unchanged in July; the vote split and policy language in this decision will shape near-term sterling direction. If UK data disappoints or the BoE strikes a dovish tone, GBP/USD could face further pressure.