GBP/USD Price Forecast: Rallies to 1.3300 neighborhood, fresh weekly top on weaker USD

GBP/USD scales higher for the second straight day as easing geopolitical tensions weigh on the USD.
Trump signaled that the US could exit the Iran war in two to three weeks without a deal with Tehran.
The technical setup seems tilted in favor of bulls and backs the case for a further appreciating move.

Haresh Menghani FXStreet

The GBP/USD pair is seen building on the overnight bounce from the 1.3160 area, or its lowest level in over four months, and gaining positive traction for the second consecutive day. The momentum lifts spot prices to the 1.3300 neighborhood, or a fresh weekly high during the early European session, and is sponsored by some follow-through US Dollar (USD) selling.

President Donald Trump signaled on Tuesday that the US could wrap up its military operation against Iran within two to three weeks, fueling optimism about the de-escalation of tensions in the Middle East and boosting investors' confidence. This, in turn, drags the safe-haven USD further away from its highest level since May 2025, which it touched the previous day, and is seen as a key factor acting as a tailwind for the GBP/USD pair.

From a technical perspective, spot prices look to extend the momentum beyond the 38.2% Fibonacci retracement level of the recent decline witnessed over the past week or so. A subsequent strength above the 200-hour Exponential Moving Average (EMA) will be seen as a fresh trigger for the GBP/USD bulls and pave the way for further gains to the 50.0% retracement at 1.3318 and then the 61.8% Fibo. level, around 1.3356.

Meanwhile, the Moving Average Convergence Divergence (MACD) line holds above its signal in mildly positive territory, and the histogram is edging higher, suggesting building upside pressure. Adding to this, the Relative Strength Index (RSI) at 66 signals firm bullish momentum but stops short of overbought, keeping scope for an extension of the move higher while warning that the rally is approaching a tactically stretched area.

On the downside, initial support now aligns at the 38.2% Fibo. level at 1.3280, followed by the 23.6% retracement at 1.3233, where a cluster of recent hourly closes reinforces its importance. A drop back through 1.3233 would weaken the nascent bullish bias and expose the 1.3200 area, while holding above 1.3280 keeps buyers in control of the near-term trend.

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

GBP/USD 1-hour chart

Risk sentiment FAQs

What do the terms"risk-on" and "risk-off" mean when referring to sentiment in financial markets?

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

What are the key assets to track to understand risk sentiment dynamics?

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

Which currencies strengthen when sentiment is "risk-on"?

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

Which currencies strengthen when sentiment is "risk-off"?

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

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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