I find it essential to determine the maximum potential upside, and I believe the key to identifying the end of the current rally lies in pinpointing the convergence point of several critical technical lines. I observe that this X-point, where Fibonacci extensions, long-term trend lines, and historical resistance levels meet, is situated remarkably high on the charts. I see the primary target currently residing at the Fibonacci extension of 1.40400, with an even more ambitious objective above at 1.41750, leading me to assume that persistent buyers will indeed attempt to propel the GBP/USD pair toward these heights. I consider the monthly chart perspective crucial, as it provides the long-term context necessary for such an analysis. I interpret the 2021 annual high of 1.41750 not just as a target, but as a critical threshold; I understand that a sustained breakout above this level would likely signify the genuine commencement of a long-term structural bull rally for the pound. I note that until that decisive breach occurs, the currency’s broader history has predominantly been characterized either by decline or by consolidation within a wide and challenging sideways range, which tempers my immediate bullish enthusiasm
Furthermore, I am evaluating two competing theories for the pair’s forthcoming trajectory based on these precise levels. I subscribe to the first theory which posits that, following a confirmed breakout above the recent high of 1.36585, buyer momentum will remain firmly in control. I anticipate that this would drive quotes northward toward an intermediate target at the Fibonacci level of 1.38540, which I view as a potential consolidation zone before a further, more vigorous push toward the primary objective at 1.40400. Conversely, I must also seriously consider the second, more cautious theory, which suggests a bearish reversal is imminent. I hypothesize that upon a rise to that same 1.38540 area, overwhelming selling pressure could seize the initiative, catalyzing a sharp reversal that sends GBP/USD back down to retest the 1.36580 support. I base this counter-scenario heavily on the concurrent behavior of the US Dollar Index (DXY), which I am closely monitoring. I recall that the dollar index is presently testing the supportive lower boundary of its own monthly ascending channel. I maintain that as long as there is no confirmed weekly or monthly close below this critical trendline, the predominant macro theory must favor a dollar recovery. I expect that after a period of consolidation at this support, the DXY will resume its broader monthly uptrend, rebounding higher within its established channel. I conclude, therefore, that such a dollar resurgence would naturally and powerfully force a bearish reversal in both the British pound and the euro, capping their rallies and validating the second theory. Ultimately, I am navigating these analyses by weighing the converging technical evidence in GBP/USD against the overarching directional bias of the dollar index, understanding that the true path will be revealed at these precise confluences of price and momentum.
