GBP/USD Price Forecast: Bears have the upper hand while below 1.3135 confluence

• GBP/USD edges lower at the start of a new week amid a modest USD strength.
• The fundamental backdrop supports prospects for a further depreciating move.
• A slide towards the 1.2960 confluence support looks like a distinct possibility.

The GBP/USD pair struggles to capitalize on a two-day-old recovery move from the 1.2975 area, or a nearly two-month trough touched last Thursday and kicks off the new week on a softer note. Spot prices currently trade just below mid-1.3000s and seem vulnerable to prolonging the recent pullback from the 1.3435 region, or the highest level since March 2022.

The US Dollar (USD) attracts some dip-buyers at the start of a new week and reverses a part of Friday's losses amid expectations that the Federal Reserve (Fed) will proceed with modest rate cuts over the next year. The British Pound (GBP), on the other hand, is undermined by rising bets for interest rate cuts by the Bank of England (BoE) in November and December. This, in turn, adds credence to the near-term negative outlook for the GBP/USD pair. 

From a technical perspective, the recent breakdown through the 50-day Simple Moving Average (SMA) and the subsequent fall below the 50% Fibonacci retracement level of the August-September upswing was seen as a fresh trigger for bears. Furthermore, oscillators on the daily chart are holding in negative territory and are still away from being in the oversold territory, suggesting that the path of least resistance for the GBP/USD pair is to the downside.

Hence, some follow-through weakness back below the 1.3000 psychological mark, towards testing the 1.2960-1.2955 confluence support, looks like a distinct possibility. The latter comprises the 100-day SMA and the 61.8% Fibo. level, which if broken should pave the way for a slide towards the 1.2900 round figure en route to the 1.2860 horizontal support. 

On the flip side, attempted recovery beyond the 1.3100 mark is likely to confront resistance near the 1.3135 region, or the 38.2% Fibo. level. The said hurdle now coincides with the 50-day SMA and should act as a key pivotal point. A sustained strength beyond might shift the bias in favor of bullish traders and allow the GBP/USD pair to reclaim the 1.3200 mark. The move up could extend further towards the 1.3250 strong horizontal support breakpoint.

GBP/USD daily chart