The GBP/USD currency pair has experienced a breather from its recent rally, pulling back to approximately 1.3230 from a high of 1.3300 in six months. Favorable news regarding US-Japan trade negotiations has boosted the US Dollar, while disappointing inflation readings in the UK have fueled expectations for possible interest rate reductions by the Bank of England. In spite of the pullback, the short-term GBP/USD outlook is bullish, with all short-to-long Exponential Moving Averages (EMAs) moving upwards and robust bullish momentum signaled by the 14-day Relative Strength Index (RSI). A breakout above 1.3292 may propel the pair to higher levels, but a fall below 1.3164 may initiate further drops.

KEY LOOKOUTS

•  The positive development in US-Japan trade negotiations has brought relief to the US Dollar, which has recovered and witnessed bids. The US Dollar Index (DXY) moving up towards 99.50 may add further pressure on GBP/USD in the short run.

•  UK’s soft inflation figures, especially in services, and a bleak jobs market outlook are raising hopes that the Bank of England will choose to cut interest rates, which could press down on the Pound.

• The GBP/USD currency pair is in a general uptrend with the support of rising Exponential Moving Averages (EMAs) and a robust V-shape recovery in the 14-day RSI, indicating that the pair may continue to rise if it surmounts recent highs.

• Look for possible price reaction at 1.3292 (April 16 high) for a potential shift to 1.3430 and 1.3500. Alternatively, a fall below 1.3164 (April 15 low) may extend the decline, with 1.3063 and the psychological 1.3000 mark serving as major support.

GBP/USD pair is facing a brief slowdown in its rally, retreating to near 1.3230 after hitting a six-month peak of 1.3300. This pullback is against the backdrop of firming US Dollar demand, fueled by upbeat news in US-Japan trade negotiations, which has assisted the US Dollar in its recovery. In contrast, weak UK inflation data and a less rosy labor market forecast have fueled hopes of possible interest rate reductions by the Bank of England, which may put further pressure on the Pound. This notwithstanding, the short-term GBP/USD outlook is bullish, with the rising Exponential Moving Averages (EMAs) and a robust bounce in the 14-day RSI pointing to the possibility of the pair reversing its downward bias and returning to upward traction should it reclaim above the 1.3292 level. But a fall below 1.3164 will stimulate further downside action, with 1.3063 and 1.3000 being crucial supports.

GBP/USD has pulled back to 1.3230 from a high of 1.3300, as the US Dollar gains strength due to favorable US-Japan trade talks. Soft UK inflation figures and hopes of Bank of England rate cuts weigh on the Pound, although the short-term outlook remains bullish if the pair is able to break above 1.3292.

• The GBP/USD pair pulled back to 1.3230 from a six-month high of 1.3300, indicating a halt in the recent rally.

•  The US Dollar has benefited as US-Japan trade negotiations improved, sending the US Dollar Index (DXY) to close to 99.50.

•  UK inflation data, particularly in the services sector, has raised hopes for possible interest rate reductions by the Bank of England.

•  The dismal UK labor market forecast, coupled with tepid inflation, increases the chances of the Bank of England relaxing its monetary policy to spur the economy.

•  In spite of the retreat, the overall GBP/USD outlook is bullish, with the Exponential Moving Averages (EMAs) rising and hinting at further bullish momentum.

•  The 14-day Relative Strength Index (RSI) has made a V-shaped recovery, which indicates that bullish momentum may continue.

•  A move above 1.3292 may take GBP/USD to higher levels such as 1.3430 and 1.3500, and a fall below 1.3164 may take it lower with 1.3063 and 1.3000 being support levels.

The GBP/USD currency pair has seen a pullback from its recent six-month high of 1.3300, falling back to 1.3230 as the US Dollar strengthens. This Greenback strength is largely due to favorable news in US-Japan trade talks, which have eased fears over global economic uncertainty. The US Dollar Index (DXY) has also recovered to the vicinity of 99.50, which represents the increasing confidence that the US is moving away from intensifying trade tensions. Investors are more confident now that the US will concentrate on bilateral deals instead of pursuing additional trade wars, thereby providing the US Dollar with a strong support.

GBP/USD DAILY PRICE CHART

CHART SOURCE: TradingView

While that, the Pound Sterling continues under pressure as gentle inflation numbers in the UK have teased hopes of interest rate reductions by the Bank of England. The UK services sector inflation eased to 4.7% in March from 5% in February, which may encourage the Bank of England to unwind its monetary policy to fuel growth in the economy. Additionally, a challenging labor market outlook suggests that UK employers may reduce hiring, further impacting the strength of the Pound. Despite these challenges, the overall sentiment for GBP/USD remains cautiously positive, as the pair has shown resilience, supported by market expectations of future upside potential.

TECHNICAL ANALYSIS

GBP/USD remains in an overall bullish trend, supported by rising Exponential Moving Averages (EMAs) across various timeframes, indicating upward momentum. The 14-day Relative Strength Index (RSI) has exhibited a V-shaped bounce, going from 40.00 up to almost 70.00, indicating strong buying pressure and sustained bullish momentum. The critical technical levels to monitor are 1.3292, the April 16 high, which would trigger further appreciation towards 1.3430 and 1.3500 if broken. On the negative side, a drop below 1.3164 (the April 15 low) might initiate a retracement to 1.3063 and the psychological barrier of 1.3000, where support is likely to be found. In general, the technical indicators suggest a cautiously positive near-term scenario for the pair.

FORECAST

GBP/USD pair might renew its bullish trajectory if it can break over the recent high of 1.3292 on April 16. Breaking above that mark would set the pair up to move higher, potentially toward the September 25 high at 1.3430, then the psychological level at 1.3500. The general positive technical signals, including the upward EMAs and robust V-shaped rebound in the 14-day RSI, indicate that an upside breakout remains a probable scenario in the near future, provided market sentiment remains positive towards the Pound.

GBP/USD cannot sustain its higher side and falls below the April 15 low of 1.3164, the pair may experience further downside action. Of key support to monitor here are 1.3063 and the psychological 1.3000 level. A fall below these levels would indicate a possible reversal of the short-term bullish perspective, which would imply a more profound correction. The UK’s soft inflation numbers and expectations of potential rate reductions by the Bank of England may also put downward pressure on the Pound, making a downside move more likely if these considerations bear weight on investor mood.