GBP/USD forecast: The pound is holding up better than it should
- GBP/USD is steady near 1.3245 while gold and Asian stocks sell off, stuck in a tight 1.3190–1.3245 range.
- Markets price about 100 basis points of Bank of England hikes, the one thing keeping the pound afloat against a firm dollar.
- I'd sell a failed bounce toward 1.3295 or a clean break below 1.3190, targeting the 1.3140 June low.
The dollar has had its way with almost everything this month, but the pound is putting up more of a fight than most. This GBP/USD forecast is about why, and whether it lasts.
What happened since Thursday
Last Blog's Bias: Bearish, only on a range break | Confidence: Medium.
Thursday's plan was to sell only if the pound broke the bottom of its range, with 1.3140 as the target and no trade if the range held. Price dipped to 1.3205 but never followed through. It stalled well short of 1.3140 and has been pinned in a tight range since. Under the plan's own rule, that was a no-trade week. The bias was right, but the move wasn't big enough to trade.
The dip came, but it never turned into a real break. No break meant no trade.
The scorecard: Fed vs Bank of England
Federal Reserve | Bank of England | |
|---|---|---|
Where rates are | 3.75–4.00% after a September hike | 3.75%, held in September (6–3 vote) |
What markets price | About 66–70% odds of another hike in October | About 100 basis points of hikes over 12 months, to 4.75% |
Next meeting | October, roughly 66–70% priced for a hike | November, about 67% priced for a hike |
The doubt | 16 of 18 officials see another hike, so little doubt | BBH thinks the Bank "may not need to tighten as much as markets expect" |
The last row is the whole story. The pound is holding up because markets expect the Bank of England to hike almost as hard as the Fed, not because the UK economy is booming. If that expectation cracks, the pound loses its only real support.
The dollar ran to a three-month high, and the pound gave ground slowly rather than collapsing.
What the Dollar Is telling me
It's still near the top. The US Dollar Index hit about 101.40 on Thursday and holds near 100.85, above Vantage's 100.59 support.
Yields haven't backed off. The 10-year Treasury yield touched 5.23% last week and is back near 5.20%.
The Fed isn't blinking. Friday's jobs report is the first real chance for October hike odds to change.
The Calendar That Matters
ForexFactory had its filters off, so impact colours didn't show. None of today's events is a red folder.
Event | Currency | Time (ET / PHT) | Forecast | Previous |
|---|---|---|---|---|
BoE's Ramsden Speaks | GBP | 6:00 AM / 6:00 PM | — | — |
Fed's Bowman Speaks | USD | 8:15 AM / 8:15 PM | — | — |
ECB's Lagarde Speaks | EUR | 9:30 AM / 9:30 PM | — | — |
BRC Shop Price Index | GBP | 7:01 PM / 7:01 AM Tue | 1.5% | 1.5% |
Ramsden sits on the Bank of England's rate-setting committee. Anything less hawkish than the 100 basis points markets expect would hit the pound directly. US PCE lands Wednesday and payrolls Friday at 8:30 PM PHT.
Reading the Chart
What the four-hour chart just did
The pound has fallen in steps for weeks, below its 20-period average near 1.3387. Since last week's 1.3205 low, it's been squeezed into a narrow 1.3190–1.3245 band, with the RSI near 28. Sellers are in control, but they need a fresh reason to push.
A tight box after a long slide. The next move out of it decides the week.
Where it goes If 1.3190 gives way
1.3140: the June low, and the first target.
1.3038: last November's low, the extension.
1.3000: the round number traders will watch if the selling runs.
On the upside, 1.3295 is the level that would change the picture. FXStreet notes that a move above it makes the 1.3140 target less likely.
Two Ways In
The bounce that fails
Price bounces out of the range toward 1.3295 and stalls there. That's where last week's sellers stepped in, and it's where I'd look to sell if the bounce runs out of steam and breaks a recent low on the 15-minute chart. The target is 1.3140.
The break that follows through
Price closes a 1-hour candle below 1.3190 with the dollar holding above 100.59. After the no-trade last week, I want a real break this time, not a dip that reverses. I sell the first small pause after the break, targeting 1.3140, with 1.3038 as the extension.
The case against me
The pound is oversold, and analysts are calling the move overextended. A hawkish Ramsden or a dollar slip below 100.59 could squeeze it back above 1.3295 fast. And with payrolls forecast at just +90,000 on Friday, a weak number could take the wind out of the whole dollar trade.
My game plan for London
Bias
Bearish, but patient. The dollar backdrop hasn't changed, but the pound is holding up and oversold.
Medium Conviction — the direction is clear, but the range needs to resolve before there's a trade.
Timing
No entries in the first 15 minutes of London (3:00–3:15 PM PHT), and none from 5:50 to 6:15 PM PHT around Ramsden. If neither trigger shows up by the end of London, I leave it for New York.
The trade
Entry
Either a stalled bounce at 1.3295 that breaks a recent low on the 15-minute chart, or a 1-hour close below 1.3190 followed by a small pause. I enter only after a 5-minute candle fully closes.
Dollar check before I click
The US Dollar Index has to be above 100.59, and the 10-year yield above 5%. If the dollar is sliding as I'm about to enter, I cut my size or walk away.
Where I'm wrong
A 1-hour close above 1.3295. That breaks the pattern of lower highs, and I stand aside rather than flip long.
Before you go
The story: the pound is holding up against a dominant dollar, and it's leaning on Bank of England hike bets to do it.
The bias: bearish, medium conviction, but only on a failed bounce or a confirmed break.
The levels: 1.3190–1.3245 is the box, 1.3140 is the target, and 1.3295 is where I'm wrong. On the dollar, watch 100.59.
The risk: the pound is oversold, and Ramsden at 6:00 PM PHT could flip it either way.
Author
Jasper Osita
Independent Analyst
Jasper has been in the markets since 2019 trading currencies, indices and commodities like Gold. His approach in the market is heavily accompanied by technical analysis, trading Smart Money Concepts (SMC) with fundamentals in mind.
