GBP/USD  continues to struggle near key levels

• GBP/USD dropped a doji candle on Monday as Cable middles.
• UK data remains limited this week, and markets focus on the Fed.
• Technical signs of exhaustion could spell the end of the Pound rally.

GBP/USD got hung up on key technical levels for the second trading day in a row, dropping a spinning top candle near the 1.2500 handle and leaving Cable traders facing a bearish downturn depending on how the Federal Reserve's (Fed) rate call goes later this week.

UK data is extremely limited this week, leaving Cable bidders to face Wednesday's upcoming Fed rate call entirely alone. The Fed is broadly expected to stand pat on interest rates for January, and depending on how confident the Fed's Chair Jerome Powell sounds during his mid-week press conference, market hopes of an uptick in the pace of Fed rate cuts in 2025 could get thrown in jeopardy. Markets have stepped up their expectations of Fed rate cuts through the year, doubling the pace of rate cuts through the calendar year to 50 bps in total. 

Political headlines are again gripping markets after US President Donald Trump got into a social media spat with Colombia as the two countries battled over the travel conditions of migrants from Colombia being extradited from the US, culminating in Donald Trump threatening massive tariffs of 50% on all US-bound exports from Colombia. The tariff through ultimately turned out to be all bluster, no bite, but countries and markets are taking notice of how quickly Trump-imposed tariffs can come out of the woodwork.

GBP/USD price forecast

A spinning top candlestick pattern bodes poorly for Cable bulls, with GBP/USD continuing to get hung up on the 1.2500 price handle. The pair has run aground of further technical resistance from the 50-day Exponential Moving Average (EMA) descending into 1.2500, and bullish momentum that has given the pair a leg up appears to be draining out of the charts.

GBP/USD daily chart