FX.co ★ GBP/USD

The GBP/USD pair has continued its upward trend within its annual trading range. Following a break below the June 24th low—which served to flush out liquidity—the market developed a series of clear technical structures, paving the way for a sustained rally. The initial rebound encountered minor resistance at the "bearish imbalance 29" level, followed by an orderly pullback toward the "bullish imbalance 31" level. At this point, buying pressure re-emerged, fueling a new leg upward and effectively bypassing any potential secondary decline that might have otherwise originated from the "bearish imbalance 29" zone. Although a "bullish imbalance 32" level has formed below the current price, strong demand this week has prevented any further retracement into that area. The underlying momentum was bolstered by the Bank of England’s significant interest rate hike. However, this hawkish move did not trigger an immediate, sustained surge; the market’s reaction was mixed, and the GBP/USD pair paused its gains to consolidate at higher levels. The Bank of England’s decision was notably hawkish: the Monetary Policy Committee voted unanimously to tighten monetary policy, reinforcing market expectations for further rate hikes—potentially as early as December. A minor pullback toward the "bullish imbalance 32" level would offer traders an excellent opportunity to initiate new long positions in line with the prevailing trend. Most importantly, the interest rate differential currently favors the British pound. Financial markets anticipate that the Bank of England may raise interest rates up to three times over the coming year, whereas the Federal Reserve is expected to implement only one or two hikes. This divergence is underscored by the Federal Reserve’s latest "dot plot" and the minutes from the Federal Open Market Committee (FOMC) meeting, which indicate that most Fed officials foresee only a single interest rate increase. Barring a significant escalation in geopolitical tensions—such as the potential for a new military conflict between the United States and Iran during a Donald Trump presidency—the dollar lacks a structural catalyst to sustain its upward trajectory. While "safe-haven" flows provided temporary support for the dollar during past geopolitical flare-ups, as these tensions subside, the primary drivers of price action have shifted toward macroeconomic fundamentals, policy divergences among central banks, and prolonged fiscal gridlock. Although speculative reports regarding further escalation in the Middle East remain a potential risk, in the absence of unforeseen shocks, the long-term trend toward a weaker dollar is fundamentally entrenched. Furthermore, the recent performance of the British pound has diverged notably from that of the euro, rendering cross-currency comparisons less reliable at this juncture. Over the past two months, selling pressure has largely exhausted its momentum, having pushed the dollar toward the upper bound of its multi-month trading range. Therefore, the current reversal in the GBP/USD exchange rate is supported by stronger economic fundamentals than those that characterized the dollar’s previous rally. Any short-term pause is likely temporary, as traders await the release of key U.S. economic data. Looking at Friday’s economic calendar, the market’s focus will shift entirely to core U.S. labor market indicators. At 21:30 Beijing time (13:30 UTC), data on non-farm payrolls, the unemployment rate, and average hourly earnings will be released. Later, at 23:00 Beijing time (15:00 UTC), the preliminary reading of the University of Michigan Consumer Sentiment Index will be published. These major data points are likely to trigger significant market volatility, potentially leading to a short-term pullback to test lower "imbalance zones," or driving the exchange rate to continue its current upward trend. Since a strong buy signal has already been identified within "bullish imbalance zone 31," technical traders are well-positioned regardless of the market's direction. From a tactical perspective, on a daily chart timeframe, the long-term outlook for the GBP/USD pair remains strongly bullish. It is advisable to maintain existing long positions; should the exchange rate pull back toward "bullish imbalance zone 32," new buying opportunities should be closely monitored. Regarding the upside targets, the primary focus for the GBP/USD pair remains the resistance level of the main trading range, at approximately 1.3670.