Sterling fell about 0.17% on Monday as the US Dollar traded firmer after last week’s hawkish Federal Reserve rate rise widened the interest-rate gap between the US and the UK. At the same time, elevated energy prices kept pressure on major central banks to tighten policy. GBP/USD was at 1.3371 after earlier touching 1.3400.
The pair was unable to extend Friday’s rebound from the 1.1335 area, which marked its lowest level since 30 July, and selling resumed at the start of the week. During early European dealings it hovered near 1.3375, down close to 0.15% on the day, with price action remaining below 1.3400 and broader momentum described as bearish beneath the 100-day simple moving average.
Bearish Outlook and Institutional Sentiment
We advise derivative traders to prepare for extended downward pressure on the GBP/USD pair in the coming weeks. The Federal Reserve’s hawkish rate stance has widened the interest rate gap, making the US Dollar much more attractive than the British Pound. Because spot prices have fallen below the critical 100-day Simple Moving Average, we expect bearish momentum to accelerate.
Historically, when GBP/USD drops below its 100-day moving average under similar macroeconomic pressures, it often experiences a further slide of 2% to 3% within the next thirty days. Recent market data shows a notable 12% rise in short positions among non-commercial traders, confirming that institutional sentiment has turned sour. We believe this statistical trend makes buying the pound highly risky right now.
Trading Strategies for Bearish Continuation
To capitalize on this trend, we recommend options traders consider buying out-of-the-money put options with expiration dates in late October. Alternatively, setting up bear put spreads can help lower trading costs while still targeting a move down toward the 1.3200 level. For futures and CFD traders, we suggest entering short positions on any brief relief rallies toward the 1.3400 resistance level.
