GBP/USD Price Forecast: Fundamental backdrop favors bulls; focus remains on US NFP

The GBP/USD pair is seen extending its retracement slide from the 1.3565-1.3570 region or its highest level since September 18, touched earlier this week, and trading with a negative bias for the third straight day on Thursday. Spot prices touch a three-day low, around the 1.3445-1.3440 area, during the first half of the European session, though the downside seems cushioned in the absence of any relevant fundamental catalyst. Moreover, the lack of any follow-through US Dollar (USD) buying warrants some caution for aggressive bearish traders, and before positioning for any further depreciating move.

Geopolitical tensions escalated after the US launched land strikes on Venezuela over the weekend, leading to the capture of its President, Nicolas Maduro, and his wife. Moreover, US President Donald Trump warned that Colombia and Mexico could also face military action as part of a widening campaign against criminal networks and the flow of illicit drugs. In other geopolitical developments, US Secretary of State Marco Rubio said that Trump retained the option of a potential use of the US military to address the objective to take control over Greenland. Adding to this, the protracted Russia-Ukraine war, unrest in Iran, and issues surrounding Gaza contribute to the safe-haven Greenback's outperformance against its British counterpart.

However, dovish US Federal Reserve (Fed) expectations fail to assist the USD to build on its weekly gains registered over the past two days and should limit the downside for the GBP/USD pair. Traders have been pricing in the possibility that the US central bank will lower borrowing costs in March and deliver another rate cut later this year. The bets were reaffirmed by the US labor market data on Wednesday. The Automatic Data Processing (ADP) reported that private-sector employment in the US rose by 41K in December against the 29K fall (revised from -32K) in November and the 47K expected. Separately, the Job Openings and Labor Turnover Survey (JOLTS) showed that the number of job openings fell to 7.146 million in November.

This suggested that demand for labor continued to ebb and largely overshadowed an unexpected pickup in the US services sector activity. The Institute for Supply Management reported that its Non-Manufacturing Purchasing Managers' Index (PMI) increased to 54.4 in December from 52.6 in the previous month. The USD bulls, however, seem reluctant to place aggressive bets and opt to wait for more cues about the Fed's rate-cut path. Hence, the market focus will remain glued to the release of the US Nonfarm Payrolls (NFP) report on Friday. In the meantime, the Bank of England's (BoE) less dovish message could act as a tailwind for the British Pound (GBP) and further contribute to limiting deeper losses for the GBP/USD pair.

GBP/USD 4-hour chart

Technical Analysis:

The 200-period Simple Moving Average (SMA) trends higher at 1.3355, with the GBP/USD pair holding above it to maintain a bullish medium-term bias. The Moving Average Convergence Divergence (MACD) histogram has turned marginally negative near the zero line, implying the MACD line sits below the Signal line, and momentum has softened. The Relative Strength Index (RSI) prints 39, below the 50 midline yet above oversold, indicating weak but not exhausted momentum.

Measured from the 1.3038 low to the 1.3562 high, the 23.6% retracement at 1.3438 offers initial support, and a hold above it would steady the tone. A clear break beneath 1.3438 would expose the 38.2% retracement at 1.3362, where confluence with the rising 200-period SMA near 1.3355 could slow losses. Momentum-wise, the bias would stay fragile while the MACD remains below the Signal line and the RSI capped under 50; a stabilization of the MACD around zero and an RSI recovery through 50 could help rebounds extend.

(The technical analysis of this story was written with the help of an AI tool)