The GBP/USD currency pair has captured traders’ attention following a crucial US-UK trade agreement and the emergence of bullish technical patterns. As of Monday, the pair was trading at 1.3300, just below the resistance level of 1.3445, corresponding to the upper edge of a cup and handle pattern.
This formation, together with a developing bullish pennant, points to a potential upside breakout. However, the outlook remains dependent on upcoming economic data from the US and UK, particularly related to inflation, GDP, and labor markets. This subject is extensively covered by Monovex brokers in their published article.
Trade Deal Triggers Speculative Activity
The recent announcement by the US President of a bilateral trade deal between the United States and the United Kingdom provided initial support for the GBP/USD pair. Under the new agreement:
- The US will remove tariffs on British automobiles, steel, and aluminium.
- In exchange, the UK will reduce digital service taxes and offer greater access to sectors such as agriculture for American firms.
Although this deal did not result in an immediate breakout, it helped to stabilize GBP/USD above the 1.3250 psychological support level. The muted reaction reflects the market’s focus on upcoming macroeconomic catalysts and the technical structures currently forming on the chart.
Key Economic Data to Watch
The next major driver for the pair will be US inflation data, set for release on Wednesday. Analysts forecast a rebound in price pressures, with Goldman Sachs projecting inflation to close the year at 3.8%, while more aggressive estimates suggest a rise beyond 4.0%. The inflation outlook is being shaped by:
- Tariffs were recently imposed by the US on foreign goods.
- The lag in consumer prices is due to pre-tariff inventory stockpiling by importers.
Additional US data will be released on Thursday, including retail sales and manufacturing production figures. These reports will come on the heels of the Federal Reserve’s recent decision to leave interest rates unchanged, reaffirming a wait-and-see monetary policy stance amid global uncertainty.
Meanwhile, in the United Kingdom, several key reports are due:
- Tuesday will bring the latest UK labor market figures, expected to show continued employment resilience.
- On Thursday, the GDP report for March is projected to indicate a modest 0.1% expansion, down from the 0.5% growth in February.
If UK data underperforms, it may constrain GBP momentum, especially if US indicators surprise to the upside. However, any signs of a stronger British economy could reinforce the bullish technical bias currently present.
Technical Analysis: Bullish Signals Forming
From a technical perspective, the GBP/USD pair is forming two bullish continuation patterns:
- Cup and Handle – A classic bullish setup. The cup represents a rounded bottom followed by a small consolidation (the handle) before a breakout. GBP/USD has completed the cup and is developing the handle, trading just below the resistance zone of 1.3445.
- Bullish Pennant – Typically forms after a strong upward movement (flagpole), followed by consolidation within converging trendlines (the pennant). The breakout usually continues the prior trend.
Currently, GBP/USD trades at 1.3300, which is:
- Above the recent support at 1.3250
- Below key resistance at 1.3428–1.3445
These levels define the range-bound behavior that traders are watching closely. A breakout above 1.3445 could trigger a move toward 1.3600, the next psychological and Fibonacci resistance level.
Indicators such as the Relative Strength Index (RSI) remain neutral near 50, suggesting room for upward movement. The 50-day and 200-day EMAs are also providing dynamic support near current levels, further validating the bullish setup.
Outlook: Leaning Bullish with Key Triggers Ahead
In the short term, the GBP/USD pair is consolidating but shows signs of an imminent bullish breakout, supported by:
- A strengthening technical structure (cup and handle + pennant)
- Positive geopolitical developments from the US-UK trade deal
- A potentially hawkish shift in US inflation dynamics
However, traders should remain cautious ahead of this week’s economic releases, as surprises—particularly on US CPI or UK GDP—could invalidate or confirm the breakout hypothesis.
Key Levels to Watch
- Resistance: 1.3428, 1.3445, 1.3600
- Support: 1.3250, 1.3175, 1.3050
Conclusion
The GBP/USD pair is positioned at a critical juncture both technically and fundamentally. The confluence of bullish chart patterns, easing US-UK trade tensions, and upcoming macroeconomic data releases makes the next few sessions crucial.
A decisive breakout above resistance could set the stage for a sustained upward trend, particularly if supported by inflation-driven policy shifts in the US and resilient economic performance in the UK.
