GBP/USD remains under pressure despite attempts to recover

GBP/USD attempted to move closer to 1.3350 on Tuesday but remained under pressure. The US dollar continues to benefit from strong US labour market data, which reinforced expectations that the Federal Reserve will maintain a restrictive monetary policy stance and could even consider further interest rate increases before the end of the year.

Developments in the Middle East provided additional support to the dollar. Following fresh Israeli strikes on targets in Iran, oil prices rose sharply, boosting demand for the US currency as a safe-haven asset. As a result, GBP/USD continues to trade near its lowest levels in almost two months.

Sentiment towards sterling has also been affected by changing interest rate expectations. While markets had previously anticipated a more aggressive tightening cycle from the Bank of England due to inflation risks, investors are now focusing increasingly on the prospect of higher rates in the US.

In addition, the latest Bank of England survey revealed a slowdown in inflation expectations among British businesses. This has reduced the likelihood of a near-term rate increase and added further pressure on the pound.

For now, the combination of a strong US dollar, elevated oil prices, and the Bank of England’s cautious stance continues to favour the US currency.

Technical analysis

On the H4 chart, GBP/USD is trading within a broad consolidation range above the 1.3306 level. The range currently extends up to 1.3369 and down to 1.3329. A breakout above the range could open the way for further gains towards 1.3380, while a move below the range would increase the likelihood of a decline towards 1.3280.

The MACD indicator broadly supports this scenario. Although the signal line remains below zero, it is pointing upwards, suggesting that short-term recovery attempts remain possible.

On the H1 chart, GBP/USD is trading within a narrower consolidation range around 1.3333, recently extending down to 1.3306. A move higher towards 1.3380 is expected in the near term.

The Stochastic oscillator supports the likelihood of short-term volatility. Its signal line is above 80 and turning sharply lower towards 20, indicating that a corrective pullback may develop before the next directional move.

Conclusion

GBP/USD remains vulnerable as strong US economic data, elevated energy prices, and shifting interest rate expectations continue to support the dollar. While technical indicators suggest that a short-term rebound is possible, the broader outlook remains challenging for sterling unless market sentiment towards the UK economy improves.