GBP/USD Price Forecast: Bulls have the upper hand, move beyond 1.3500 awaited

GBP/USD attracts buyers for the second straight day amid a broadly weaker USD.
The broader fundamental and technical setup backs the case for additional gains.
Any corrective slide to the 100-day SMA could be bought into and remain limited.

Haresh Menghani FXStreet

The GBP/USD pair builds on the previous day's strong move higher and gains positive traction for the second consecutive day on Tuesday. The momentum lifts spot prices to the highest level since early October, closer to the 1.3500 psychological mark, and is sponsored by a broadly weaker US Dollar (USD). Moreover, the technical setup backs the case for a further appreciating move for the currency pair.

The recent breakout through the 100-day Simple Moving Average (SMA) and a subsequent strength beyond the 61.8% Fibonacci retracement level of the September-November downfall, around the 1.3500 round figure, will be seen as a fresh trigger for bulls. Moreover, positive oscillators on the daily chart validate the near-term constructive outlook and suggest that the path of least resistance for the GBP/USD pair is to the upside amid the Bank of England's (BoE) hawkish tilt.

The 100-day SMA has flattened in recent sessions and is starting to edge higher, with price holding above it and preserving a firm tone. The Moving Average Convergence Divergence (MACD) line stays in positive territory but has eased from prior highs, hinting at moderating upside momentum. A sustained break and acceptance above the 1.3500 mark could pave the way for a move beyond the 1.3600 mark, towards the 78.6% Fibo. retracement level, around the 1.3615 area.

If the pair retreats, the 100-day SMA, currently pegged around the 1.3370 region, would offer initial dynamic support to the GBP/USD pair. The Relative Strength Index (RSI) at 68 sits near overbought, signaling robust yet stretched momentum that could cap gains without fresh catalysts. A clear move above the 61.8% retracement would keep buyers in control, whereas failure to hold the break could see consolidation back toward the moving average.

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

GBP/USD daily chart

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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