GBP/USD is currently positioned near 1.3420, approaching its weekly low and the significant 1.3400 area, following an inability to maintain early-week advances towards 1.3567, where a distinct short-term peak was established prior to a notable downturn. The recent decline is primarily attributed to the strength of the USD. A series of stronger-than-anticipated US economic indicators has recalibrated expectations for the Federal Reserve, resulting in the US Dollar Index climbing to a four-week peak near 99.00, with GBP showing minimal opposition. The US side presented a succession of positive surprises: The ISM Services PMI has surpassed expectations, indicating a continued expansion in the US services sector. New orders and prices paid remain high, contributing to persistent services inflation. The ADP report indicated that private-sector hiring exceeded expectations, underscoring the idea that labor demand remains robust. In the latest official labor statistics, the Nonfarm Payrolls report indicated a headline increase of 50,000, falling short of the anticipated 60,000. However, the unemployment rate decreased to 4.4% from 4.5%, and average hourly earnings experienced a year-on-year rise of 3.8%, surpassing the expected 3.6%. Another significant jobs report revealed 210,000 new jobs, emphasizing the ongoing volatility yet steadfast strength of the US labor market. The conclusion is straightforward: market participants have reduced their forecasts for imminent Federal Reserve rate cuts. The likelihood of a March cut has decreased from over 70% to approximately 40%. US yields have increased, and the USD has adjusted upward across the board. The macro repricing is what caused GBP/USD to decline from 1.3567 and move into the 1.34 range.
Conversely, the narrative in the UK presents a different scenario. UK inflation has moderated to approximately 2.5%, slightly exceeding the BoE’s 2% target, while the growth outlook continues to be delicate. The forthcoming UK GDP release will attract significant attention; however, unless it exceeds expectations by a considerable margin, it merely strengthens a well-known narrative: the Bank of England faces mounting pressure to implement cuts ahead of the Federal Reserve. The difference in policies – with the Fed held back by robust data and the BoE moving towards easing – presents a fundamental challenge for GBP/USD. The markets currently perceive the UK as the weaker macroeconomic component in the pair, with softer inflation, lackluster growth, and fiscal concerns contributing to elevated risk premiums for UK assets compared to those in the US. Consequently, even in the absence of significant developments in the UK last week, GBP/USD has followed the US trend, declining from above 1.35 to the 1.34 range. The overall USD environment supports a bearish outlook for GBP/USD. The US Dollar Index established robust support at a significant Fibonacci level around 97.94, subsequently forming an ascending triangle from the lows observed during Christmas and advancing higher as the most recent data emerged. The breach of the 98.85–99.00 resistance band has paved the path toward the significant 100.00–100.22 resistance zone. As long as DXY remains above 98.85, the dollar possesses both technical and macro support to maintain its upward momentum. Cross-asset signals indicate a risk-off sentiment: Gold is trading near $4,500, a notably elevated level considering a stronger dollar and increasing US yields, which underscores significant hedging and prevailing fear in the market. Crypto has experienced a downturn, with Bitcoin finding it challenging to maintain levels beneath $90,000, indicating a noticeable decline in institutional interest for high-beta risk assets. In such conditions, high-beta currencies such as GBP tend to exhibit weakness against a resilient USD, making GBP/USD a more favorable short opportunity during rallies instead of a buying opportunity during dips.
The short-term outlook for GBP/USD is distinctly negative. The price was rejected at 1.3567, establishing it as the significant short-term peak. Since then, the pair has fallen below the 100-day moving average, and the 20- and 50-day moving averages have crossed lower, indicating a bearish trend. The market currently rests precisely at the 1.3400 demand zone, bolstered by several layers of support beneath it. Multiple independent analyses align on comparable levels: intraday movements indicate the pair momentarily fell below 1.3400 before recovering to 1.3420, suggesting that buyers are protecting the initial test of this level, yet they do not possess the momentum for a lasting reversal. Just beneath lies the 1.3360–1.3375 support band, emphasized by multiple desks, with the 55-day EMA around 1.3366 positioned centrally within that range. A wider range between 1.3355 and 1.3371 aligns with Fibonacci support noted in other analyses and is positioned slightly above the 200-day moving average around 1.3350. Provided that 1.3567 limits the upward movement and the price stays beneath the 100-day moving average, any rallies will be seen as corrective, indicating that the directional risk continues to lean towards 1.3360–1.3350, rather than moving higher.
Analyzing the GBP/USD price movement, the peak at 1.3787 recorded in 2025 can be interpreted as a corrective phase within the larger upward trend originating from 1.3051. The recent rise to 1.3567 and subsequent failure indicates that the medium-term structure remains unfinished. Should the 1.3366 EMA and the corresponding 1.3360–1.3350 zone experience a decisive break, the ongoing decline will transform into another segment of that identical corrective framework. In that scenario, the next clear downside target is the 1.3008 support level, which has served as a significant floor in the broader pattern and corresponds with prior swing lows. Additionally, the more significant corrective boundary is identified at the 38.2% retracement level of 1.0351–1.3787, which stands at 1.2474. Provided that the downside is held above 1.2474, the broader medium-term uptrend stemming from the recovery after 1.0351 continues to be preserved, even in the event of the pair experiencing a multi-figure correction. The long-term outlook remains negative for sterling as long as the resistance zone between 1.4248 and 1.4480 – associated with the 38.2% retracement of 2.1161–1.0351 at 1.4480 – prevents any significant recovery. Within that context, the price movement from 1.3051 remains merely a corrective formation in the overarching long-term downtrend that initiated from 2.1161, rather than indicating a complete secular reversal.
From a trading perspective, the intraday and short-horizon structure is characterized by a compression between support in the 1.3400–1.3360 band and resistance in the 1.3500–1.3567 zone. One desk anticipates GBP/USD trading within a range of 1.3400–1.3535, noting that while upside risks are accumulating, robust support is not expected to falter just yet. Another highlights 1.3414 as a key Fibonacci level; the recent dive through that area followed by a bounce to 1.3420 confirms that it has shifted from respected support to a level that can be probed and overshot in a bearish phase. On the topside, the initial resistance for any rebound is positioned near 1.3450, where the 20- and 100-day moving averages are starting to converge, succeeded by the 1.3500 psychological level. Above that, 1.3567 serves as the pivotal point that characterizes the ongoing bearish movement; only a consistent breach above 1.3567 would mitigate the current downside inclination and pave the way toward 1.3787. Until then, any movement toward 1.3500–1.3567 remains susceptible to further selling pressure.