Key points:
- The British pound slides 2.7% against the dollar over three weeks.
- Bank of England (BoE) cuts interest rates for the first time since 2020, impacting the value of the GBP.
- Potential double bottom pattern forming after the rate cut decision from the BoE.
The GBPUSD pair is trading on a notable decline, with the British pound erasing 2.7% of its value against the US dollar over the past three weeks. This drop has been largely influenced by the recent decision to cut interest rates by the Bank of England, marking the first rate reduction since 2020.
Picture: Cable slides to key support level, as observed on the VT Markets app.
The decision to lower interest rates has added downward pressure on the British pound. The cut resulted in a 1% drop on the decision day and continued to weigh on its value. Lower interest rates typically make a currency less attractive as they reduce the yield on deposits, prompting investors to seek higher returns elsewhere.
GBPUSD chart pattern: Forming a double bottom
The GBPUSD pair is approaching a potential double bottom near the $1.26 level. This level served as a strong support back in early July, where bulls took control and propelled the pound to a one-year high of $1.3045.
The market is now watching closely to see if this support level will hold once again. If the pair reaches $1.26, traders may expect a rebound if bullish forces decide to challenge the bearish momentum.
Read more about popular candlestick patterns you should know.
Such a potential double bottom could offer a lucrative entry point if the support holds, and a rebound occurs. However, traders should remain cautious and be prepared for increased volatility, particularly with ongoing economic uncertainties and central bank actions influencing market sentiment.
