has staged a notable recovery from recent lows, reclaiming key technical levels as improving momentum aligns with a more supportive fundamental backdrop for sterling. While the broader range structure remains intact, the near-term bias has shifted cautiously higher as the pound benefits from relative policy support versus the US dollar.
Technical Picture: Higher Lows Signal Improving Structure
On the daily chart, GBP/USD has formed a sequence of higher lows since rebounding from the 1.3100 area, indicating improving short-term structure after a corrective phase.
- Price is holding above the 15-day and 20-day moving averages, both of which have begun to turn higher.
- Recent pullbacks have been shallow, suggesting buying interest on dips rather than distribution.
- The pair is now testing a key horizontal zone around 1.3500–1.3520, a level that has repeatedly acted as both support and resistance.
Key Technical Levels
Resistance
- 1.3520–1.3600: Major resistance zone and prior range highs
- A daily close above 1.3600 would confirm a bullish breakout and expose 1.3720–1.3800
Support
- 1.3450–1.3480: First dynamic support near short-term averages
- 1.3320–1.3350: Stronger structural support
- A break below 1.3320 would weaken the recovery narrative and shift focus back toward 1.3200
Momentum Indicators
- RSI (14) near 61 reflects strengthening bullish momentum without entering overbought territory
- The indicator has remained above the 50 line during recent pullbacks — a classic bullish momentum signal
- This supports the view that the current advance is corrective-to-constructive rather than purely technical noise
Fundamental Drivers: Sterling Finds Relative Support
Bank of England: Restrictive Bias Supports the Pound
Sterling has drawn support from the Bank of England’s relatively hawkish tone, particularly when compared to other major central banks.
Key factors supporting GBP:
- UK remains sticky, especially in services
- Wage growth continues to run above levels consistent with the BoE’s inflation target
- As a result, policymakers have signalled caution around premature rate cuts
Markets now expect the BoE to move more gradually than previously anticipated, which has helped underpin GBP.
Federal Reserve: Dollar Momentum Moderates
On the U.S. side, the dollar has shown signs of losing momentum as:
- data shows gradual cooling
- Growth remains solid but less surprising on the upside
- Markets increasingly price in eventual , even if timing remains uncertain
This has reduced the dollar’s yield advantage at the margin, allowing GBP/USD to recover from oversold levels.
Rate Differentials: Less USD-Dominant Than Before
While U.S. rates remain high in absolute terms, the relative policy gap between the Fed and BoE has narrowed, diminishing some of the structural pressure on sterling seen earlier in the year.
As long as UK data remains resilient, GBP/USD is less vulnerable to sustained downside driven purely by rate expectations.
Forward Scenarios
Bullish Continuation
- Sustained trade above 1.3500, followed by a confirmed break of 1.3600
- Would target 1.3720–1.3800
- Likely supported by firm UK data or softer U.S. inflation prints
Range / Pullback Scenario
- Failure at resistance could keep the pair range-bound between 1.3320 and 1.3600
- A pullback toward 1.3350–1.3400 would still be consistent with a constructive outlook
GBP/USD has shifted from defensive to cautiously constructive, supported by improving technical momentum and a relatively restrictive Bank of England stance. While the pair remains within a broader range, the balance of risks has tilted modestly higher in the near term.
Medium-term bias: Neutral to bullish
Short-term outlook: Constructive, resistance-dependent
Key risk: Sharp re-pricing of BoE rate expectations or renewed USD strength
