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The GBP/USD currency pair has been trapped inside a broad range for months, and when you zoom out and look at it from a long-term perspective, not much has changed. Yet the pair is beginning to look a little more interesting again, because when you zoom in to lower time frames to take a closer look, you start to see some interesting developments.
That shift matters. When a market stays range-bound for long enough, traders often stop expecting clean movement at all. But the recent behavior in the GBP/USD suggests that short-term pressure may now be building in a way that deserves closer attention, even if the larger multi-month structure which is basically a weakly bearish range remains intact.
Why GBP/USD Matters More Now
Part of what makes the GBP/USD more interesting this week is the fact that both central banks relevant to this currency pair – the US Federal Reserve and the Bank of England – will be holding policy meetings. The Fed will be meeting on Wednesday, and the Bank of England will be meeting on Thursday. While neither central bank is expected to change its interest rate, and in the case of the Bank of England markets are pricing this in as an overwhelming probability, markets see about a 31% chance of the Federal Reserve hiking its rate by 0.25%. If this happens, it will likely make a big impact on the price here.
The technical picture is also starting to show some changes, which will be discussed in the next section. Finally, there is a new government in the UK which might take some different fiscal approaches, although this is not likely to be a major factor.
Mixed Technical Signals Leave GBP/USD Exposed to Macro Surprises
In the price chart shown below, the clearest near-term feature is the passive bullish breakout from the symmetrical bearish price channel that has contained the GBP/USD’s price action for more than a week. This manually drawn channel is notable because it appears to align extremely closely with a linear regression analysis study over the same period as well, which makes the structure look more credible and less arbitrary than a loosely drawn visual guide. When a market breaks out of such a channel, it can indicate a significant trend change, even though it might only be a short-term trend.
Despite that bullish factor, when you zoom out to a price chart showing the last few months of action, you see a weakly bearish range, which has made lower highs and lower lows, which tends to support the bearish case.
Nevertheless, looking at the short-term chart again, we can see that the breakout is showing signs of having failed, with the price falling quickly back down, where it might now be at a pivotal point: the support level at $1.3329 which is currently confluent with the top of the broken descending price channel. What happens at this point might be significant.
Tariffs, Geopolitics and Central Banks Complicate the Setup
The main blind spot here is that as technical factors are obviously mixed, and as markets are awaiting the results from central bank meetings concerning both currencies, things could get chaotic. Add to the mix President Trump’s new tariffs which are starting to come in, and the potentially volatile situation between Iran and the Eastern Mediterranean, price movements are potentially highly unpredictable this week, meaning that traders and investors might have a case for sitting on the sidelines regardless of the cases I built in my earlier sections. It is easy to make a valid technical analysis while forgetting about a storm which might be approaching. Technical analysis and trend following tend to be more reliable tools when there is a quiet environment without external distractions.
What Could Still Push GBP/USD Higher This Week
The alternative scenario to the broadly bearish picture is that the support level at $1.3329 does not just hold, but generates a strong enough bid to push the price substantially higher. This would be a real surprise for most analysts, even though the Bank of England has one of the highest interest rates of all major currencies and so has tended to hold its own better against the USD recently than many other currencies have.
To rise substantially, the price will have to fight the dominant weakly bearish trend, but more importantly over the near term, overcome several key resistance levels quite close by. However, if the price manages to clear the $1.3400 area, the situation would start to look much more bullish, and that is only 70 pips away from the nearest support – this currency pair can easily move that much in a day, in fact it typically does.
Where Next for the GBP/USD?
With a relatively strong US Dollar near its 13-month high price, and a Fed which has almost a one in three chance of hiking its interest rate this Wednesday, the balance of probabilities points towards a move lower, even potentially a break to longer-term low prices. However, Forex is often an unpredictable market, and there are several factors which could render technical analysis effectively useless.
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