It attempted to approach 1.3350 on Tuesday but remained under pressure. The US dollar continues to benefit from strong US labor market data, which reinforced expectations that the Federal Reserve will maintain a tight monetary policy stance and could even consider further interest rate increases before the end of the year.
Developments in the Middle East provided additional support to the dollar. Following new Israeli attacks on targets in Iran, oil prices rose sharply, boosting demand for the US currency as a safe haven asset. As a result, GBP/USD continues to trade near its lowest levels in almost two months.
Sentiment towards sterling has also been affected by changing interest rate expectations. While markets had previously anticipated a more aggressive tightening cycle from the Bank of England due to inflation risks, investors are now increasingly focused on the prospect of higher rates in the United States.
Furthermore, the Bank of England's latest survey revealed a slowdown in inflation expectations among British businesses. This has reduced the likelihood of a near-term rate hike and added further pressure on the pound.
For now, the combination of a strong US dollar, high oil prices and the Bank of England's cautious stance continues to favor the US currency.
Technical analysis
On the H4 chart, GBP/USD is trading within a wide consolidation range above the 1.3306 level. The range currently extends to 1.3369 and 1.3329. A break above the range could open the way for further gains towards 1.3380, while a move below the range would increase the probability of a drop towards 1.3280.
The MACD indicator broadly supports this scenario. Although the signal line remains below zero, it is pointing upwards, suggesting that short-term recovery attempts remain possible.
On the H1 chart, GBP/USD is trading within a tighter consolidation range, around 1.3333, recently extending to 1.3306. An upward move towards 1.3380 is expected in the short term.
The stochastic oscillator supports the probability of short-term volatility. Its signal line is above 80 and turning sharply towards 20, indicating that a corrective pullback may develop before the next directional move.
Conclusion
GBP/USD remains vulnerable as strong US economic data, elevated energy prices and changing interest rate expectations continue to support the dollar. While technical indicators suggest a short-term recovery is possible, the broader outlook remains challenging for sterling unless market sentiment towards the UK economy improves.
By RoboForex Analysis Department
Disclaimer:
Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
