Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3200.
- Add a stop-loss at 1.3500.
- Timeline: 1-2 days.
Bullish view
- Buy the pair and set a take-profit at 1.3500.
- Add a stop-loss at 1.3200.
The GBP/USD exchange rate surged to a key resistance level as the recent sterling rally gained steam. It jumped to a high of 1.3425, its highest swing in 2024, meaning it has jumped by over 10.5% from its lowest level this year.
Why the British pound is soaring
The GBP/USD pair has continued its strong surge this week. This rally has happened because of the ongoing US dollar sell-off. The US dollar index, a gauge that measures the performance of the currency against a basket of its peers, has dived from the year-to-date high of $110 to $98.
The dollar’s performance has diverged with that of other safe-haven assets. For example, gold has jumped to a record high of $3,350, a sign that investors and central banks see it as a better haven.
The plunging dollar has also raised concerns on whether large investors will continue to hold US assets. Indeed, US government bonds have sold off recently, while top indices like the Dow Jones and Nasdaq 100 have lagged behind their European peers.
The main cause of this performance is Donald Trump’s policies, which are still sending shockwaves around the world. He has raised tariffs on imported goods from other countries, including the UK.
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Trump has also continued to criticize Federal Reserves Jerome Powell for not cutting interest rates. There are also rumours that he may fire him, an unprecedented move that has never been done before. Such a move would likely be stopped by the Supreme Court.
The next key news to watch that may move the GBP/USD pair will be statements by several Fed officials like Raphael Bostic and Philip Jefferson. Most officials have hinted that the bank was not in a hurry to cut rates, but were ready to interveneif the economy slowed down.
GBP/USD technical analysis
The daily chart shows that the GBP/USD exchange rate has surged in the past few months. It has jumped by double digits and moved to a hig of 1.3427, a crucial level that was its highest level in 2024. It has formed what looks like a V-shaped recovery in this period.
The pair even formed a golden cross pattern as the 50-day moving average moved above the 200-day MA. Also, the MACD and the Relative Strength Index (RSI) have kept rising.
Therefore, after hitting a key resistance level, it will likely pull back as some investors start to take profits. If this happens, the key point to watch will be at 1.3200. A jump above the resistance at 1.3425 will point to more upside.
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