GBP/USD is currently positioned at approximately 1.3430–1.3435, resting at its weekly low after struggling to maintain levels above the 1.3550–1.3570 resistance zone, where it recorded a four-month peak close to 1.3568. The pair has experienced a decline for four consecutive sessions, shifting from the mid-1.35s to the low-1.34s as the U.S. Dollar Index approaches 99.00 in anticipation of the NFP release. Price is now effectively pinned between immediate resistance at the nine-day EMA around 1.3464 and key support at the 50-day EMA near 1.3380–1.3381. The rejection above 1.3550 and the drift back under 1.3450 confirm that the latest leg is a corrective downswing inside a broader recovery from last year’s lows, not yet a full trend reversal. Provided that spot remains above the 1.3380 level, the impact is more tactical than structural. The USD strength pressuring GBP/USD is coming from positioning and timing, not from a booming U.S. economy. The expectation for today’s NFP stands at 60k jobs, a decrease from 64k in November, indicating a notable slowdown in hiring activity. Initial jobless claims have increased to 208k, while continuing claims have climbed to 1.914 million, indicating a softening in the labor market. The ADP report indicated a modest increase of 41k in private payrolls, while job openings decreased to 7.146 million, reflecting a decline in available positions compared to October. Simultaneously, core PCE inflation, which is the Federal Reserve’s favored measure, fell below 3% in Q4 2025 for the first time in over two years. The interplay of a softer job market alongside declining inflation is precisely the scenario that typically warrants a reduction in interest rates. The markets are aware of this and anticipate that the Fed will begin easing in 2026. However, Fed funds futures currently reflect approximately an 86% likelihood that there will be no change at the January meeting. That gap between weakening data and a central bank that is not cutting yet is what supports the USD into NFP: traders are front-running the event by buying dollars inside a rising channel on the DXY, which trades around 98.9–99.0 with support at 98.85 and the 200-period moving average down at 98.50. RSI on the index sits in the mid-60s, showing solid momentum but not extreme euphoria. This context elucidates the reasons behind the decline of GBP/USD from 1.3568 to approximately 1.3430, occurring without any specific shocks originating from the UK.
The Inflation Challenge Faced by the Bank of England and Its Continued Impact on GBP. The macroeconomic narrative in the UK presents a stark contrast to that of the U.S. While the Fed is edging toward cuts, the Bank of England is still constrained by stubborn inflation. Price growth remained elevated throughout 2025, consistently exceeding 4%, significantly surpassing the target. This is the reason the Bank of England has underscored that its policy stance is merely “near” neutral, rather than being loose at this stage. The markets are unable to accurately reflect the same rate of easing from Threadneedle Street as they do from the Fed. The divergence observed, with the Fed transitioning from a restrictive stance to a neutral one while the BoE faces limited capacity for cuts, provides structural support for GBP. The potential decline of GBP/USD is constrained by U.S. data alone, which is a significant factor in why movements toward the 1.3400–1.3380 range are viewed as chances to establish medium-term long positions rather than triggers for panic selling. In relative terms, intraday performance tables indicate that GBP is losing some ground against the euro while remaining roughly flat against the U.S. dollar. This aligns with a narrative of tactical weakness within an overall constructive larger framework.
From a purely technical standpoint, GBP/USD is currently situated at a critical decision point. On the daily timeframe, the pair is positioned beneath the nine-day EMA (approximately 1.3450–1.3464) while remaining above the 50-day EMA (around 1.3380–1.3381). The shorter EMA rolling over while remaining above the 50-day line indicates that momentum has softened, yet the medium-term uptrend remains intact. The 200-day SMA is positioned just below 1.3380, further solidifying that range as a significant support cluster. A clean daily close below the 50-day EMA and the 200-day SMA would confirm the break of the main bullish trend line highlighted by multiple analyses and open room toward 1.3350 first and then the more distant eight-month low around 1.3010. On the positive side, regaining the nine-day EMA around 1.3464 would indicate the initial signs of fatigue in the corrective phase. Above that, the three-month high at 1.3562 and the recent spike near 1.3568 are immediate resistance. Should GBP/USD manage to close above that zone, the trajectory towards the six-month peak at 1.3726 will be reinstated, followed by 1.3788, marking the highest point since October 2021. Currently, the daily RSI hovering in the low-50s indicates a neutral stance, supporting the notion of consolidation instead of a definitive trend. Shorter-term intraday indicators that were previously overbought have now reset, paving the way for another impulsive move when the NFP shock occurs.
It is crucial to recognize the significant differences between various time frames. On the short-term charts, GBP/USD has already breached its primary bullish trendline established from early December, influenced by trading beneath the EMA50 on intraday setups. The recent break, along with the presence of conflicting negative signals in the relative strength indicators and the inability to maintain levels above 1.3550, suggests the likelihood of a prolonged corrective bearish wave in the immediate future. This is what is pulling price back towards 1.3400 and why 1.3380 is now so critical. However, on the broader daily structure, the pair continues to trade along the supportive line of a medium-term uptrend, with both the 50-day and 200-day averages showing an upward trajectory. The market has disrupted the short-term trend; however, the larger bullish channel remains intact for now. Provided that spot maintains its position above 1.3380–1.3350, this situation is characterized as a pullback within a bullish framework, rather than the onset of a comprehensive bearish trend. The upcoming pivotal factor for GBP/USD is the NFP, which has a headline consensus of 60k. If the report significantly underperforms – for instance, a figure well below 60k accompanied by weaker revisions – the dollar’s existing 98.9–99.0 range may break, potentially driving DXY down toward 98.5 and providing GBP/USD with momentum to rally past 1.3464 and into the 1.3560–1.3570 resistance zone. In that scenario, the broken intraday trendline would quickly be negated and dips bought aggressively. A modest miss or a near-consensus number would probably keep the pair locked between 1.3380 and 1.3460, with traders fading both extremes until U.S. CPI and UK data deliver a clearer macro impulse.
A robust upside surprise in employment figures – a reading significantly exceeding 60k alongside solid wage growth – would bolster the dollar’s trajectory, propelling DXY decisively above 99 and likely compelling GBP/USD to breach the 1.3380 support level, targeting 1.3350 initially. In that case, attention would quickly shift to whether buyers defend the 1.3300 handle or capitulate toward the 1.3010 low over the coming weeks. Given the macro divergence and the technical levels, the stance on GBP/USD is nuanced. In the short term, the pair is experiencing a corrective downswing, as evidenced by the break of the short-term trendline and repeated failures at the 1.3550–1.3570 range, which supports a bearish outlook while the price remains below the nine-day EMA and under 1.3450. For intraday traders, rallies into 1.3460–1.3500, if they occur before a clear fundamental shift, continue to present appealing opportunities to fade with tight stops above 1.3565–1.3570. Simultaneously, the 1.3400–1.3380 area, where the 50-day EMA, 200-day SMA, and previous trend support intersect, warrants careful consideration before any selling actions are taken. For swing and medium-term traders, that band appears to be a sensible accumulation zone, particularly if NFP falls short of expectations or if Fed rhetoric becomes more dovish while core PCE remains under 3%. From a structural perspective, as long as GBP/USD maintains a daily closing position above 1.3380, the overall sentiment remains slightly bullish. Any dips present buying opportunities, with upside targets set at 1.3560, followed by 1.3726 and 1.3788. A decisive move below 1.3350 that holds would shift the medium-term perspective to neutral at best and pave the way for a deeper decline toward 1.3200–1.3100, with 1.3010 serving as the critical threshold to determine if this entire recovery phase from last year’s lows has indeed faltered.