GBP/USD Tests Key Support as Bulls and Bears Battle for Control

GBP/USD is currently testing critical support levels around 1.2650, experiencing increased volatility as traders weigh conflicting market signals. The pair has retreated 0.4% from recent highs, pressured by renewed dollar strength amid risk-off sentiment. Sterling faces headwinds from mixed UK economic data, with inflation showing signs of cooling while employment remains resilient. Technical indicators suggest the pair is at a crucial juncture, with the 50-day moving average at 1.2645 acting as immediate support. A break below could trigger further declines toward 1.2600, while holding above may encourage bulls to target resistance at 1.2720. USD/JPY dynamics are also influencing broader dollar sentiment, with the yen strengthening on safe-haven flows. Traders should monitor upcoming UK GDP data and Bank of England commentary for directional cues, as the pair appears poised for a decisive move following this consolidation phase.