GBP/USD churns in congestion zone ahead of midweek holiday

• GBP/USD coiled in familiar territory just above 1.2500 on Monday.
• A lack of notable data on the UK side will constrain already-thin Cable flows.
• Broader market volumes remain tepid as investors take the year-end off.

GBP/USD pulled back on Monday, kicking off the new trading week with a fresh down day. The pair fell around one-third of one percent, easing back below 1.2550 as bids remain mired in a near-term congestion pattern on the bottom end of recent price action. The UK's data release schedule this week is devoid of any meaningful prints, leaving Cable at the mercy of broader market flows in a tepid year-end environment.

Outside of some general profit-taking and long-term position management, global market volumes are crimped tightly by the year-end holiday season. Markets will be further constrained in the midweek, when global markets will be shuttered for the New Year's Day closure.

This week, the main data highlight will be the December US ISM PMI figures, set to be released on Friday. The December US ISM Manufacturing PMI is projected to decrease slightly to 48.3 from 48.4. Additionally, several Federal Reserve (Fed) officials are scheduled to speak during the latter part of the week, as they work to clarify the Fed's recent shift towards lower-than-expected projections for the number of rate cuts anticipated in 2024.

GBP/USD price forecast

With Cable price action continuing to grind out chart paper just above 1.2500, GBP/USD is sliding into a sideways channel in the near-term. However, Cable traders should be on the lookout for a fast breakout to either side once the new year kicks off in earnest.

GBP/USD hasn't made much progress to the low side after hitting multi-month lows in November, however a bullish recovery fizzled before bids could challenge the 200-day Exponential Moving Average (EMA) which is now falling through 1.2800.

GBP/USD daily chart