GBP/USD Forecast: BOE’s Governor Bailey hit the pound

GBP/USD Current price: 1.3895

• The EU launched legal action against the UK for breaching the Northern Ireland protocol.
• BOE’s Governor Andrew Bailey said that the central bank is committed to buying bonds.
• GBP/USD has bounced sharply from around 1.3800, but the bullish potential is limited.

The GBP/USD pair traded as low as 1.3808 during London trading hours, but a weaker dollar helped GBP/USD trim intraday losses and settle near the 1.3900 figure. The pound was hit by news that the European Union launched legal action against the UK for breaching the Northern Ireland protocol.

Additionally, Bank of England Governor Andrew Bailey said that the central bank is committed to buying bonds at an elevated pace, sounding cautious about the economic recovery. His words are relevant ahead of the BOE’s monetary policy meeting that will take place next Thursday.  The UK macroeconomic calendar will remain empty until then.

GBP/USD short-term technical outlook

The GBP/USD pair is just below a daily high of 1.3905 with limited bullish potential. In the 4-hour chart, the pair is back below a directionless 200 SMA, but below the shorter ones, with the 20 SMA gaining bearish strength. The Momentum indicator recovered from near oversold readings but hovers around its midline, while the RSI indicator stabilized around 48.

Support levels: 1.3865 1.3820 1.3770  

Resistance levels: 1.3945 1.3990 1.4030

View Live Chart for the GBP/USD