The GBP/USD currency pair continues to trade in negative territory near 1.3500 during Monday’s early European session, reflecting a modest retracement after recent gains.
This mild decline is largely attributed to a rebound in the US Dollar (USD), as traders reacted to a combination of profit-taking and technical resistance levels. This well-prepared article from BluSkyMint’s broker Tony Harris offers a structured breakdown of the topic.
Despite this short-term pullback, the overall bullish sentiment surrounding the pair remains strong, underpinned by growing expectations that the US Federal Reserve (Fed) may adopt a more accommodative monetary policy later this year following a softer-than-expected US jobs report released on Friday.
From a technical perspective, the GBP/USD outlook remains constructive. The pair is trading well above the 100-day Exponential Moving Average (EMA) on the daily chart, which acts as a key dynamic support level.
The 100-day EMA is widely followed by both institutional and retail traders, and maintaining a position above it indicates a sustained bullish trend. This level has historically acted as a launchpad for upward momentum, and as long as the pair remains above it, trend-following traders may continue to favor long positions.
The 14-day Relative Strength Index (RSI), currently hovering near the midline, points to neutral momentum in the short term. This neutral reading indicates that GBP/USD is neither overbought nor oversold, allowing for further consolidation before any significant directional move.
Traders often watch for RSI readings above 70, which suggest overbought conditions, or below 30, indicating oversold conditions, to time potential trend reversals or short-term pullbacks.
Immediate resistance for GBP/USD is observed at 1.3550, which corresponds to the September 1 high. A decisive break above this level could trigger further upside momentum, potentially pushing the pair toward 1.3584, the upper boundary of the Bollinger Band, where price volatility is expected to increase.
Beyond this, the next resistance target lies at 1.3752, the June 27 high, representing a major long-term resistance zone that could attract profit-taking or short-term sellers.
On the downside, the first support level is identified at 1.3405, the low of August 21. A breach below this level could expose the pair to a test of the 100-day EMA near 1.3381, a crucial trend-defining support zone.
Should selling pressure intensify, the September 3 low at 1.3333 becomes the next target, marking a significant retracement level that may attract value buyers looking for opportunities in the pair.
Fundamentally, GBP/USD is being shaped by macroeconomic developments, particularly expectations surrounding the US Federal Reserve’s interest rate policy. Friday’s US jobs report showed a slowdown in non-farm payroll growth, raising the probability of a Fed rate cut later this year.
A softer USD typically supports GBP/USD, providing a bullish tailwind that reinforces the pair’s uptrend. At the same time, the Bank of England (BoE) continues to monitor inflation and economic activity, which could influence future policy decisions and add a layer of volatility to the currency pair.
Volatility indicators such as Bollinger Bands highlight that GBP/USD is currently in a range-bound phase, oscillating between support and resistance levels. Traders may interpret this as an opportunity to implement range-trading strategies, buying near support levels around 1.3405 or the 100-day EMA, and selling near resistance levels at 1.3550 or 1.3584.
The pair’s consolidation around the 1.3500 zone suggests that market participants are weighing fundamental data against technical levels, resulting in sideways price action that could precede a more decisive breakout.
From a risk management standpoint, positioning long trades above 1.3500 with a stop-loss near 1.3405 allows traders to take advantage of potential upside while limiting exposure to downside moves. Conversely, if GBP/USD falls below the 100-day EMA, short-term bearish trades targeting 1.3381 and 1.3333 may become attractive.
Utilizing technical tools such as the RSI, EMA, and Bollinger Bands provides critical insight into momentum shifts, trend sustainability, and potential breakout zones, allowing traders to make informed decisions in both trending and consolidating markets.
In summary, GBP/USD continues to consolidate near 1.3500, maintaining bullish sentiment above the 100-day EMA. While the pair faces resistance at 1.3550, the technical setup remains favorable for further upside potential, especially if the USD weakens amid Fed rate cut speculation.
Support levels at 1.3405 and the 100-day EMA provide important risk control points, while momentum indicators like the RSI suggest neutral conditions that could precede either a breakout or continued range-bound trading.
Overall, the combination of technical support, fundamental tailwinds, and neutral momentum indicates that GBP/USD is well-positioned for selective bullish opportunities in the near term, with careful attention to key levels and market-moving events remaining essential for effective trade management.
