CFD Trading Rate Great Britain Pound vs US Dollar (GBPUSD)

The Pound Sterling (GBP) is likely to trade in a range between 1.3270 and 1.3340. In the longer run, GBP could rise above 1.3350; the potential of it reaching 1.3400 seems low for now, UOB Group FX analysts Quek Ser Leang and Peter Chia note.

GBP can rise above 1.3350

24-HOUR VIEW: “After GBP rose sharply last Thursday, we highlighted on Friday that ‘while the rapid rise appears to be overextended, GBP seems to have enough momentum to test 1.3320 before leveling off.’ We added, ‘the next resistance at 1.3350 is unlikely to come under threat.’ GBP subsequently rose more than expected, reaching a high of 1.3341. Despite the advance, upward momentum has not increased much, and GBP is unlikely to rise further. Today, GBP is more likely to trade in a range, probably between 1.3270 and 1.3340.”

1-3 WEEKS VIEW: “We have held a positive GBP view since early last week (see annotations in the chart below). In our latest narrative from last Friday (20 Sep, spot at 1.3280), we highlighted that ‘while the price action continues to suggest GBP strength, overbought conditions could potentially limit any further advance.’ We added, ‘the next level to watch is 1.3350.’ GBP subsequently rose to 1.3341, closing at 1.3320 (+0.26%). Conditions remain overbought, but the advance is not showing sign of exhaustion just yet. That said, while GBP could rise above 1.3350, the potential of it reaching 1.3400 seems low for now. On the downside, should GBP break below 1.3210 (‘strong support’ level previously at 1.3160), it would mean that GBP is not strengthening further.”

• GBP/USD trades on a softer note near 1.3310 in Monday's Asian session. 
• Rising bet on further Fed rate cuts later this year might undermine the US Dollar. 
• The preliminary September UK/US PMI data will be in the spotlight on Monday.

The GBP/USD pair edges lower to 1.3310, snapping the three-day winning streak during the early Asian session on Monday. The modest recovery of the US Dollar (USD) weighs on the major pair. Investors will focus on the flash reading of the UK and US Purchasing Managers Index (PMI) data, which are due later on Monday. 

The US Federal Reserve (Fed) lowered its key overnight borrowing rate by a half percentage point last week, the first interest rate cut since the early days of the Covid pandemic. The Fed statement noted, “The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance.”  

Fed Chair Jerome Powell was cautious not to declare a victory over inflation as pricing pressures continue to come down. The US Personal Consumption Expenditures (PCE) index, the Fed's preferred inflation gauge, which will be released on Friday, might offer some hints about the progress on inflation and the US interest rate outlook. Meanwhile, the uncertainty surrounding the US economic outlook and rising expectations of the Fed rate cut later this year will continue to drag the USD lower against the Pound Sterling (GBP). 

On the other hand, Bank of England (BoE) Governor Andrew Bailey said that it is "vital that inflation stays low," and for that, "we need to be careful not to cut the interest rate too fast or by too much." The BoE decided to hold interest rates at 5.0% in its most recent monetary policy meeting. The decision came one day after the UK's Consumer Price Index (CPI) inflation data held steady at 2.2%  YoY in August. 

• GBP/USD hits resistance at 1.3340 and forms a potential ‘shooting star’ candlestick, signaling possible further losses.
• Key support lies at 1.3250, with additional levels at 1.3239, 1.3200, and the July 14 peak at 1.3142.
• On the upside, GBP/USD must reclaim 1.3300 to retest the YTD high of 1.3340, with further resistance at 1.3437.

The Pound Sterling registered minimal gains versus the US Dollar during the North American session after reaching a two-and-a-half-year high of 1.3340 on an upbeat retail sales report in the UK. At the time of writing, the GBP/USD trades at 1.3282, a gain of 0.03%.

GBP/USD Price Forecast: Technical outlook

From a technical standpoint, the GBP/USD clashed with solid resistance as the pair reached the top of an ascending channel shy of testing 1.3350. Since then, the pair erased those gains, about to form a ‘shooting star’ candle, which opens the door for further losses.

Momentum remains bullish according to the Relative Strength Index (RSI). However, a negative divergence looms, which could spur a pullback in the pair.

If GBP/USD tumbles below 1.3250, further downside is seen. Once cleared, the next stop would be the September 6 peak at 1.3239, ahead of 1.3200. If surpassed, key support levels will be exposed, like the July 14, 2023, peak at 1.3142, followed by the September 11 low of 1.3001.

Conversely, if GBP/USD reclaims 1.3300, the first resistance would be the year-to-date (YTD) high of 1.3340 ahead of the March 1, 2022, pivot high at 1.3437.

GBP/USD Price Action – Daily Chart

Stronger than expected August Retail Sales (up 1.0% in headline terms versus a 0.4% rise expected) drove the pound to its highest in 2 1/2 years against the USD and the highest in 2 years against the EUR, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

GBP drives gains to test major resistance

“Swaps have pared a little more BoE easing risk for November but continue to reflect a little more than 25bps of anticipated cuts.”

“The Pound Sterling (GBP) has failed to hold early gains and movement off the intraday peak is starting to look somewhat negative on the intraday chart (via a bearish “shooting star” candle signal). Daily price action looks—potentially—similar. This may be important as I noted 1.3330 as major, longterm resistance in yesterday’s comments.”

“For now, I note that broader trends are GBP-bullish, with solid-looking trend momentum developing on the intraday, daily and weekly charts. While off its best today, the pound will still (likely) close out the week strongly overall. Look for firm sterling support on dips to the low/mid 1.32s.”

The Pound Sterling (GBP) appears to have enough momentum to test 1.3320 before leveling off. In the longer run, price action continues to suggest GBP strength; overbought conditions could limit gains, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

Bullish momentum leads towards 1.3320

24-HOUR VIEW: “We expected GBP to trade in a sideways range of 1.3150/1.3250 yesterday. However, after dropping to 1.3155, GBP soared, breaking above 1.3300 (high of 1.3314). GBP closed on a firm note at 1.3286 (+0.54%). While the rapid rise appears to be overextended, GBP seems to have enough momentum to test 1.3320 before leveling off. The next resistance at 1.3350 is unlikely to come under threat. Support is at 1.3255; a breach of 1.3230 would suggest that the current upward pressure has faded.”
1-3 WEEKS VIEW: “The next level to watch is 1.3350. On Tuesday (17 Sep, spot at 1.3210), we indicated that GBP ‘could potentially break above this year’s high, near 1.3270.’ After GBP rose to 1.3298, we indicated yesterday (19 Sep, spot at 1.3200) that ‘further GBP strength is not ruled out, but any advance is expected to face significant resistance at 1.3300.’ The ease with which GBP took out 1.3300 was surprising (GBP rose to 1.3314 in NY trade). While the price action continues to suggest GBP strength, overbought conditions could potentially limit any further advance. The next level to watch is 1.3350. On the downside, should GBP break below 1.3160 (‘strong support’ level previously at 1.3120), it would mean that GBP is not strengthening further.”

• GBP/USD attracts buyers for the third straight day and draws support from a combination of factors.
• The BoE’s decision to keep rates unchanged acts as a tailwind amid dovish Fed-inspired USD decline.
• The technical setup remains tilted in favor of bulls and supports prospects for further near-term gains.

The GBP/USD pair trades with a positive bias for the third straight day on Friday and hovers around the 1.3300 mark during the Asian session, just below its highest level since March 2022 touched the previous day.

The British Pound (GBP) continues to draw support from the Bank of England's (BoE) decision on Thursday to keep interest rates unchanged and run down its stock of government bonds by another  £100 billion over the coming 12 months. In contrast, the US Dollar (USD) languishes near its lowest level since July 2023 amid bets for more interest rate cuts by the Federal Reserve (Fed) and turns out to be a key factor acting as a tailwind for the GBP/USD pair.

From a technical perspective, the overnight sustained breakout through a short-term descending trend-line extending from the late August swing high was seen as a fresh trigger for bullish traders. Moreover, oscillators on the daily chart are holding in positive territory and suggest that the path of least resistance for the GBP/USD pair is to the upside. That said, the Relative Strength Index (RSI) on the daily chart is flashing slightly overbought conditions. 

This makes it prudent to wait for some intraday consolidation or a modest pullback before traders start positioning for the next leg of a positive move. Nevertheless, the GBP/USD pair seems poised to climb further towards the next relevant hurdle near the 1.3365 region before aiming to reclaim the 1.3400 mark and test the March 2022 swing high, around the 1.3435-1.3440 region.

On the flip side, the 1.3265-1.3260 area, or the previous YTD peak, now seems to protect the immediate downside. Any further decline is more likely to attract fresh buyers and remain cushioned near the aforementioned descending trend-line resistance, now turned support near the 1.3200 mark. The latter should act as a key pivotal point, which if broken decisively could accelerate the corrective decline towards testing the 1.3150 strong horizontal support.

GBP/USD 4-hour chart

• GBP/USD continues to test fresh 30-month highs.
• Fed rate cut sparks broadbase Greenback selloff.
• BoE held rates despite early summer cut, UK Retail Sales in the pipe.

GBP/USD found a fresh 30-month high bid on Thursday, with a broad-market selloff in the US Dollar sparking a risk bid in Cable and bolstering the Pound Sterling. The Federal Reserve’s (Fed) 50 bps cut this week helped galvanized global markets into a risk-on stance, while the Bank of England’s (BoE) fearful rate hold did little to spark further strength under the GBP.

The only datapoint of note on Friday will be UK Retail Sales for August, though not much momentum is likely to come of it with investors exhausted after a double-header of central banks between the Fed and the BoE. UK MoM Retail Sales in August are expected to tick down to 0.4% from the previous 0.5%, while the annualized figure is expected to hold steady at 1.4%.

The BoE held interest rates steady at 5.0% early Thursday, with the Monetary Policy Committee (MPC) voting seven-to-one for another rate hold. The BoE initially opened the gates to rate cuts earlier in the summer with a quarter-point cut at the last meeting, but the move may have proved to be premature. BoE policymakers are waiting to see how the UK economy unfolds before making further rate adjustments.

On the US data side, Initial Jobless Claims eased back to 219K for the week ended September 13, down from the previous week’s revised 231K and under the median market forecast of 230K. The Philadelphia Fed Manufacturing Survey for September also printed well above expectations, with the spread index of manufacturing conditions improving to 1.7 from the previous seven-month low of -7.0 and handily beating the expected print of -1.0.

Fed Chair Jerome Powell convinced markets that the Fed’s outsized jumbo cut of 50 bps this week wasn’t a snap response to deteriorating economic conditions but rather an attempt to get ahead of the curve and bolster the US labor market. Powell successfully floated a rebranding of an entire half-percentage-point cut as a “recalibration,” and investors rewarded the Fed’s latest narrative pivot by plowing cash into risk assets across the board and yanking the rug out from beneath the safe-haven US Dollar.

GBP/USD price forecast

Despite clipping into a fresh 30-month high on Thursday and crossing the 1.3300 handle, Cable bidders have struggled to push price action deep into bull country, and markets will enter the Friday wrapup with prices hovering near the key psychological level. A firm bullish trend is still baked into daily candlesticks with the pair climbing above the 50–day Exponential Moving Average (EMA) near 1.3000.

GBP/USD daily chart

• GBP/USD rallies to new high for 2024 on Thursday. The trend is bullish. 
• A bearish divergence with momentum, however, indicates an increased risk of a temporary setback. 

GBP/USD has rallied to a new high for 2024 on Thursday; the pair reached 1.3314 during trading on Thursday, its highest price for the year. 

The short, medium and long-term trends are bullish suggesting the current is flowing north. It is a principle of technical analysis that “the trend is your friend” so the odds favor still more upside. 

GBP/USD Daily Chart

A break above 1.3314 would confirm more upside, targeting 1.3350 and then 1.3400. 

However, price is showing bearish divergence with the Relative Strength Index (RSI) momentum indicator (red dashed lines on chart above). This happens when the price reaches a new high but the RSI does not. The non confirmation is a bearish sign as it indicates underlying weakness. There is an increased risk GBP/USD could pull back. 

If the pair pulls back it will probably only be temporary as all three trend timeframes are bullish. Support at 1.3137 is likely to catch falling prices, or if not at 1.3042 (July 18 high).

Further Pound Sterling (GBP) GBP strength is not ruled out, but any advance is expected to face significant resistance at 1.3300, UOB Group Quek Ser Leang and Victor Yong note.

GBP to test 1.3300 near term

24-HOUR VIEW: “In NY trade, GBP soared briefly to 1.3298, and then pulled back sharply, closing at 1.3214 (+0.39%). The price movements did not provide any clarity. Today, we expect GBP to trade sideways, likely between 1.3150 and 1.3250.”

1-3 WEEKS VIEW: “Our most recent narrative was from two days ago (17 Sep, spot at 1.3210), wherein the recent increase in momentum “is likely to lead to further GBP strength, potentially breaking above this year’s high, near 1.3270.” While GBP broke above 1.3270 in NY trade, it pulled back sharply from 1.3298. While there has been no further increase in momentum, further GBP strength is not ruled out. However, any advance is expected to face significant resistance at 1.3300. On the downside, should GBP break below 1.3120 (no change in ‘strong support’ level), it would mean the current upward pressure has faded.”

• GBP/USD attracts some dip-buyers amid expectations that the BoE will hold rates steady.
• Rising US bond yields assist the USD to gain some follow-through traction and caps gains.
• Bulls also seem reluctant to place aggressive bets and prefer to wait for the BoE decision.

The GBP/USD pair finds some support near the 1.3150 region on Thursday and for now, seems to have stalled its retracement slide from the 1.3300 neighborhood, or the highest level since March 2022 touched the previous day. Spot prices climb closer to the 1.3200 mark during the Asian session, albeit lack follow-through amid some follow-through US Dollar (USD) buying and currently trade with modest intraday losses. 

The US Federal Reserve (Fed) decided to kick-start the policy-easing cycle and lowered borrowing costs by 50 basis points (bps) on Wednesday, though cooled hopes for oversized rate cuts going forward. Furthermore, Fed policymakers don't see inflation returning to the 2% target before 2026, triggering a sharp recovery in the US Treasury bond yields. This, in turn, lifts the USD Index (DXY), which tracks the Greenback against a basket of currencies, to a one-week high and turns out to be a key factor exerting some downward pressure on the GBP/USD pair. 

Meanwhile, expectations that the Bank of England's (BoE) rate-cutting cycle is more likely to be slower than in the United States (US) continue to underpin the British Pound (GBP) and help limit losses for the currency pair. The UK Consumer Price Index (CPI) report released on Wednesday showed that inflation in the services sector accelerated more than expected in August. This reaffirmed bets that the BoE would hold rates steady at the end of the September policy meeting later this Thursday and warrant caution before placing bearish bets around the GBP/USD pair. 

Traders might also prefer to move to the sidelines heading into the key central bank event risk. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for the GBP/USD pair is to the upside. That said, the two-way price action witnessed over the past few days, along with the overnight failure near the 1.3300 mark, warrants some caution for bullish traders. Hence, some follow-through buying is needed to support prospects for an extension of the pair's move up from the 1.3000 psychological mark, or the monthly low touched last week. 

• GBP/USD has a fresh 30-month high in the bag after Fed rate cut.
• BoE rate call is in the barrel for Thursday, but no moves are expected.
• UK Retail Sales set to wrap up the week on Friday.

GBP/USD hit a fresh 30-month high on Wednesday, pushed within inches of the 1.3300 handle after the US Federal Reserve (Fed) trimmed interest rates by a jumbo 50 bps and chalking in the US central bank’s first rate cut in over four years. The UK’s Bank of England (BoE) is set to deliver its own September rate call early Thursday, but no moves are expected from the BoE after already cutting reference rates earlier this summer.

Forex Today: Investors’ attention now shifts to the US economic health

The BoE is expected to hold interest rates steady at 5.0% in a seven-to-two vote. The BoE’s Monetary Policy Committee (MPC) previously voted five-to-four to reduce interest rates by 25 bps from 5.25%, and markets are expecting the BoE to hold steady for this meeting.

The Fed's dot plot of the Federal Open Market Committee's (FOMC) Summary of Economic Projections was also revised downward from the central bank's previous rate outlook. The median policy expectations from the Fed now see the Fed Funds rate at 4.4% by year-end 2024 and 3.4% by year-end 2025, down from 5.1% and 4.1%, respectively.

Going deeper into the Fed's notes, Fed policymakers now see US Gross Domestic Product (GDP) growth of 2.0% flat through 2024, down from the previous print of 2.1% in June. Fed officials also expected the US Unemployment Rate to settle around 4.4% by the end of 2024.

Fed Chair Jerome Powell did his best to soothe markets during his ensuing press conference following the Fed's bumper 50 bps rate trim, highlighting that the Fed will resume its wait-and-see approach to incoming economic data in the weeks to come before deciding on further rate cuts. The Fed head's measured approach to explaining the Fed's policy adjustment helped to keep market flows on-balance, and rate markets are pricing in 65% chance of no further action at the FOMC's next rate call on November 7.

GBP/USD price forecast

Despite rallying into a fresh 30-month high near 1.3300 on Wednesday, markets quickly pared back the day’s volatility to keep Cable pinned near familiar levels around the 1.3200 handle. A firm bullish trend is still baked into daily candlesticks with the pair climbing above the 50–day Exponential Moving Average (EMA) near 1.3000.

GBP/USD daily chart

• GBP/USD registers gains of over 0.80% following Fed’s cut.
• The Fed delivers a 50 bps rate cut as it grows confident that inflation will reach its 2% target.
• The Fed's dot-plot projects the fed funds rate to end 2024 at approximately 4.4%.

The GBP/USD hit a new yearly high of 1.3286 during the North American session after the Fed surprised the markets with a 50 bps rate cut. At the time of writing, the pair trades volatile within the 1.3200-1.3300 range as traders await Fed Chair Jerome Powell's press conference.

Fed cuts rates by 50 bps, not unanimously, as Bowman dissents

In their monetary policy statement, Fed policymakers acknowledged that economic activity continues to expand solidly, though the unemployment rate has "moved up." They also noted that while inflation "remains somewhat elevated," the Committee "has gained greater confidence that inflation is moving sustainably toward 2 percent" and believes that the risks to achieving its employment and inflation goals are now roughly balanced. The Federal Open Market Committee (FOMC) highlighted that the economic outlook remains uncertain.

The Fed's decision was not unanimous, as Governor Michelle Bowman favored a 25-basis point (bps) rate cut.

Regarding the Summary of Economic Projections (SEP), Fed officials anticipate another 50 bps of rate cuts by the end of 2024 and an additional 100 bps of cuts projected for 2025.

GBP/USD reaction to Fed’s cut

The GBP/USD extended its gains above the previous yearly peak at 1.3266, with traders eyeing 1.3300. Further upside is seen once cleared, with the next resistance lying at the March 1, 2022, high at 1.3437.

• GBP/USD bias remains bullish, with the RSI favoring buyers, though profit-taking ahead of the Fed decision limits further gains.
• A 25-bps Fed rate cut could see GBP/USD fall toward support at 1.3200, 1.3151, and 1.3100, with a potential retest of 1.3001.
• A 50-bps cut could push GBP/USD above 1.3300, targeting the March 2022 high of 1.3437.

The Pound Sterling posted modest gains during the North American session, hitting a three-week high of 1.3254, but failed to gain traction as traders braced for the Federal Reserve’s monetary policy decision. Therefore, GBP/USD traders dragged the exchange rate toward 1.3205, still above its opening price by 0.30%.

GBP/USD Price Forecast: Technical outlook

The GBP/USD bias is bullish, though it has failed to break to new yearly highs due to a possible change of scenario. At the time of writing, the Relative Strength Index (RSI) favors buyers, while price action hints they-‘re booking profits ahead of the Fed.

If Powell and Co. decide to cut rates by 25 basis points (bps), further downsides will be seen in the GBP/USD. This will put into play the 1.3200 figure and the daily low of 1.3151. If those levels are taken out, the next support would be 1.3100 ahead of the latest cycle low at 1.3001, the September 11 low.

On the other hand, a 50-bps cut could cause the GBP/USD to climb past 1.3300, opening the door to testing the March 1, 2022 peak at 1.3437.

GBP/USD Price Action – Daily Chart

The Pound Sterling (GBP) is likely to trade sideways between 1.3120 and 1.3210. In the longer run, increase in momentum is likely to lead to further GBP strength, potentially breaking this year’s high, near 1.3270, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

GBP rangebound for now

24-HOUR VIEW: “After GBP soared two days ago, we indicated yesterday that ‘while the sharp advance seems to be overdone, there is room for GBP to rise 1.3240 before levelling off.’ GBP subsequently rose less than expected to 1.3229, staging a surprisingly sharp pullback to 1.3147. The pullback appears to be running ahead of itself, and GBP is unlikely to weaken much further. Today, GBP is more likely to trade sideways between 1.3120 and 1.3210.”

1-3 WEEKS VIEW: “Two days ago, GBP rose sharply. Yesterday (17 Sep, spot at 1.3210), we highlighted that ‘the increase in momentum is likely to lead to further GBP strength, potentially breaking above this year’s high, near 1.3270.’ We added, ‘should GBP break below 1.3120, it would mean that the buildup in momentum has faded.’ GBP then rose to 1.3229 before falling sharply to 1.3163. While upward momentum has slowed, we continue to hold the same view for now.”

• GBP/USD appreciates ahead of the release of UK inflation data on Wednesday.
• The UK Consumer Price Index might have risen by 2.2% YoY in August, matching the rate observed in July.
• The US Dollar struggles due to rising odds of the FOMC opting for a bumper 50 basis point rate cut in September.

GBP/USD inches higher to near 1.3160 during the Asian hours on Wednesday. Traders await the release of August Consumer Price Index (CPI) figures from the United Kingdom (UK). Traders will shift their focus on the Federal Reserve (Fed) interest rate decision scheduled later in the North American session.

The UK CPI is anticipated to have increased at an annual rate of 2.2% in August, consistent with the July figure. The core annual CPI is expected to rise to 3.5%, up from the previous 3.3%. Additionally, monthly inflation is projected to grow by 0.3%, following a decline of 0.2% in July.

The Bank of England is set to announce its monetary policy on Thursday, with inflation levels potentially influencing their decision. Financial markets expect the BoE to maintain its current interest rate at 5%, with a more aggressive approach anticipated starting in November. The BoE forecasts inflation could rise to 2.75% in the coming months before gradually declining and potentially falling below the 2.0% target by 2025.

The US Dollar faces challenges amid rising expectations that the Federal Open Market Committee (FOMC) may announce a substantial 50 basis point rate cut on Wednesday. The CME FedWatch Tool indicates that markets are assigning a 33.0% probability to a 25-basis-point rate cut, while the likelihood of a 50-basis-point cut has risen to 67.0%, up from 62.0% just the previous day.

On Tuesday, US Retail Sales rose by 0.1% month-over-month in August, following a revised 1.1% increase in July, surpassing expectations of a 0.2% decline and indicating resilient consumer spending. Meanwhile, the Retail Sales Control Group increased by 0.3%, slightly below the previous month's 0.4% rise.

• GBP/USD eased back on Tuesday as markets brace for Fed appearance.
• UK CPI inflation data due early Wednesday, but unlikely to spark meaningful momentum.
• Markets are in a toss-up on Fed rate cut forecast.

GBP/USD pared back on Thursday, declining back toward 1.3150 as investors buckle down for the wait to Wednesday’s broadly-antiicpated rate cut from the Federal Reserve (Fed), where the US central bank is expected to kick off a rate cutting cycle.

UK CPI inflation figures are due early Wednesday, but the non-preliminary inflation print is unlikely to generate significant momentum with the figures all but fully priced in. Final UK CPI inflation figures for August are expected to print at 0.3% MoM compared to the previous -0.2% contraction, while the annualized CPI print is forecast to come in at 3.5% YoY, up from the previous 3.3%.

Forex Today: What if the Fed…?

US Retail Sales figures in August helped to keep market Fed expectations anchored, rising 0.1% compared to the median forecast of a -0.2% contraction. July’s Retail Sales figure was also revised higher to 1.1%, though core Retail Sales (excluding automotive purchases) only rose 0.1% compared to the 0.2% forecast.

The only meaningful event remaining on the data docket this week is the Fed’s upcoming rate call on Wednesday. Markets have been angling for a reduction in the fed funds rate since the beginning of the year when investors were clamoring for a March cut. According to the CME’s FedWatch Tool, rate markets are still split on the depth of the Fed’s first expected rate trim since early 2020, with rate traders pricing in 60% odds of a 50 bps double cut to kick off the Fed’s next rate cutting cycle. The remaining 40% of rate cut expectations are stacked on a more reasonable 25 bps.

GBP/USD price forecast

Cable’s 0.6% surge to kick off the trading week has fizzled on Tuesday, with daily candlesticks continuing to grind back into the high side, with multi-year highs sitting just north of 1.3250.

Despite an overall bullish tilt, GBP/USD price action is running the risk of getting caught in a bull trap, with the pair having run hot in a 1.66% technical recovery from the last swing low into the 1.3000 handle.

GBP/USD daily chart

• GBP/USD remains upward biased, but short-term momentum has shifted bearish after dipping below 1.3200.
• Key support lies at 1.3146, with further downside targets at 1.3100 and the recent low of 1.3001.
• On a rebound, resistance levels include 1.3200, the YTD high of 1.3266, and the March 22 peak at 1.3298.

The British Pound erased its earlier gains and dropped below 1.3200 against the Greenback after the US Census Bureau reported stronger-than-expected US Retail Sales. Even though the data didn’t change expectations for a 50-basis points (bps) Fed rate cut, the GBP/USD posted losses of over 0.20% and exchanged hands at 1.3186.

GBP/USD Price Forecast: Technical outlook

The GBP/USD is upward biased even though the pair fell below 1.3200 following US Retail Sales data. Momentum shifted slightly bearishly in the short term, but the Relative Strength Index (RSI) suggests that buyers are in charge and that the dips should be bought.

If the market continues to fall, the GBP/USD's first support would be the September 15 low of 1.3146. Once cleared, the next stop would be 1.3100, followed by the latest swing low at 1.3001.

On further strength, the GBP/USD first resistance would be 1.3200, followed by the year-to-date (YTD) high at 1.3266, ahead of the March 22, 2023 peak at 1.3298.

GBP/USD Price Action – Daily Chart

Room for GBP to rise to 1.3240 before levelling off. In the longer run, increase in momentum is likely to lead to further GBP strength, potentially breaking this year’s high, near 1.3270, UOB Group FX strategists Quek Ser Leang and Lee Sue Ann note.

Room for GBP to rise to 1.3240

24-HOUR VIEW: “GBP rose sharply yesterday, closing at 1.3216 (+0.69%). While the sharp advance seems to be overdone, there is room for GBP to rise 1.3240 before levelling off. The major resistance at 1.3270 is unlikely to come under threat. To keep the momentum going, GBP must not break below 1.3170 with minor support at 1.3195.”

1-3 WEEKS VIEW: “GBP fell to within a couple of pips of 1.3000 last week, then rebounded strongly. Yesterday, it closed on a strong note at 1.3216 (+0.69%). The increase in momentum is likely to lead to further GBP strength, potentially breaking above this year’s high, near 1.3270. On the downside, should GBP break below 1.3120, it would mean that the buildup in momentum has faded.”

• GBP/USD traders move to the sidelines ahead of the FOMC/BoE policy meetings this week. 
• Rising Bets for a 50 bps Fed rate cut keep the USD bulls on the defensive and lend support.
• Traders now look to the US Retail Sales to grab short-term opportunities later this Tuesday.

The GBP/USD pair oscillates in a narrow trading band just above the 1.3200 mark during the Asian session on Tuesday and consolidates the previous day's strong move up to over a one-week high. Investors opt to move to the sidelines ahead of the key central bank event risks – the highly-anticipated two-day FOMC meeting starting this Tuesday and the Bank of England (BoE) policy update on Thursday.

The Federal Reserve (Fed) is scheduled to announce its decision on Wednesday and the markets are currently pricing in over a 60% chance of an oversized 50-basis points interest rate cut amid signs of easing inflationary pressures. This keeps the US Treasury bond yields depressed at one or two-year lows and fails to assist the US Dollar (USD) to register any meaningful recovery from the YTD low, which, in turn, is seen acting as a tailwind for the GBP/USD pair.

The British Pound (GBP), on the other hand, is underpinned by expectations that the BoE's rate-cutting cycle is more likely to be slower than in the United States (US). That said, investors are still betting on more BoE rate cuts, especially after data released last week pointed to a slowdown in the UK wage growth and a flat GDP print for the second straight month in July. This might hold back traders from placing aggressive bullish bets around the GBP/USD pair and cap the upside. 

Moving ahead, there isn't any relevant market-moving economic data due from the UK on Tuesday, leaving spot prices at the mercy of the USD. Later during the early North American session, traders will take cues from the release of US Retail Sales data, which, along with the US bond yields, will influence the USD demand and provide some impetus to the GBP/USD pair. Nevertheless, the aforementioned fundamental backdrop warrants some caution for aggressive traders.