Pound falls as Middle East war continues to escalate

The GBP/USD pair is trading near the 1.3350 level, losing ground for the third consecutive day amid intensifying tensions in the Middle East. On Wednesday, the International Energy Agency (IEA) agreed to release around 400 million barrels of Oil from member countries’ strategic reserves to tame energy prices.

Markets were increasingly confident that the Bank of England (BoE) would cut interest rates at next week’s monetary policy meeting. However, inflationary pressure from higher Oil prices have clouded the policy outlook, prompting expectations from policymakers to remain cautious and potentially delay rate cuts.

Additionally, according to a Reuters poll, the BoE is expected to hold the interest rate at 3.75% on March 19, with 43 of 50 economists, or 86%, expecting a hold (vs 35% for a hold in the February poll).

In the United States (US), macroeconomic data were better than anticipated. The US Goods and Services Trade Balance posted a $54.5 billion deficit in January, better than the $72.9 billion deficit in December. Initial Jobless Claims for the week ended March 7 declined to 213K from a revised 214K in the previous week, beating expectations of 215K.

Short-term technical analysis

On the 1-hour chart, GBP/USD trades at 1.3345. The near-term bias is mildly bearish as spot holds below the 20-period Simple Moving Average (SMA) at 1.3381 and the 100-period SMA at 1.3396, keeping the pair under layered dynamic resistance. The short-term SMA is edging down toward the longer one, reinforcing selling pressure after repeated failures to sustain above the 1.34 handle. The Relative Strength Index (RSI) indicator at 34 leans lower, which signals building bearish momentum but also warns that further downside extension would need fresh selling interest.

In the 4-hour chart, GBP/USD is mildly bearish as the pair holds below both the 20-period and 100-period SMAs, with the shorter average capped beneath the longer and price extending the rejection from the 1.34 region. The downward-sloping 100-period SMA around 1.3438 reinforces the broader corrective tone, while the 20-period SMA near 1.3412 tracks closer to price, limiting recovery attempts. The Relative Strength Index (RSI) retreats toward the low 40s, indicating fading bullish momentum and keeping sellers in control on intraday rallies.

Immediate resistance is seen at 1.3370, where a horizontal barrier converges with recent price congestion, followed by 1.3409, which aligns with the descending short-term average cluster and the latest swing failure zone. On the downside, initial support stands at 1.3339, guarding the recent base of the range; a clear break below this area would open the way toward the mid-1.32s as the next bearish objective. A sustained move back above 1.3409 would be needed to negate the current downside bias and signal a more durable recovery phase.

(The technical analysis of this story was written with the help of an AI tool.)