GBP/USD Price Forecast - Pound Near 1.39 as Dollar Confidence Cracks After Fed

GBP/USD Price Outlook: Pound Stretches Toward 1.39 as Dollar Confidence Cracks

Spot Structure and Immediate Levels on GBP/USD

GBP/USD is trading around 1.3830–1.3850, hugging the 1.3869 peak from September 2021 and revisiting price territory last seen in August 2021 after a surge of more than 300 pips from the mid-1.35s. The pair is locked inside a 1.3750–1.3850 band, with buyers repeatedly defending the 1.3750–1.3770 pocket and pressing against resistance at 1.3850–1.3869. That zone is the focal point for a potential double top, while a clean extension targets 1.3925 first and then the 1.4000 handle. On the daily chart, GBP/USD is firmly above the rising 9-day EMA near 1.3667 and the 50-day EMA around 1.3461. The fast average is above the slow one and both slope higher, confirming a bullish short-term regime. Price is moving within a rising wedge, with the upper boundary close to 1.3910 and the lower line near 1.3610. The 14-day RSI hovers around 75, deep in overbought territory, which warns of stretched momentum even as the trend structure remains constructive.

Dollar Side: DXY Near 96.00 and Policy Credibility Dragging USD

On the dollar leg of GBP/USD, the backdrop is clearly negative. The US Dollar Index trades around 96.00, near multi-year lows, after a two-week slide that continued even though the Fed kept the funds rate at 3.50%–3.75% and repeated that inflation remains above target. The problem for USD is not the policy rate but confidence in the policy framework. Markets are discounting political interference risk around Fed independence under the Trump administration and an unpredictable fiscal-trade mix, which encourages a structural “sell America” stance. That is visible across the board: USD is down 0.26% against GBP, 0.34% against EUR, 0.27% versus CAD, 0.83% versus AUD, 0.59% versus NZD and 0.50% versus CHF on the day. Even with jobless claims near 209K and no obvious macro collapse, investors prefer to offload dollar exposure rather than treat it as a safe haven.

Pound Side: Upside Options Skew and Four-Year Highs for GBP/USD

The GBP side is backed by positioning and options flows rather than hype. Three-month risk reversals in the pound are at their least negative level since last May, showing traders are paying relatively more for GBP/USD upside than downside. Spot is trading around 1.3834–1.3869, its highest zone against USD since 2021, after reclaiming and holding above 1.3800. The 1.3750 region, which previously acted as resistance, now acts as a demand band where dips are bought aggressively. That behaviour, combined with the risk-reversal shift, signals that both leveraged traders and real money are treating pullbacks as opportunities to add GBP, not to fade strength.

Role of the Bank of England Versus a Politically Constrained Fed

The next major macro catalyst on the GBP side is the Bank of England. With GBP/USD near four-year highs and UK data not collapsing, the BoE cannot afford a message that looks casually dovish. Inflation and wage dynamics remain sticky enough that a rapid easing profile would clash with the domestic backdrop. At the same time, the Fed is perceived as boxed in: nominally hawkish, but constrained by politics and administration preferences for a softer dollar. That relative setup means the rate-differential story does not currently punish the pound. As long as the BoE avoids signalling an aggressive easing pivot while Washington tolerates a weaker USD, the structural bias favours GBP/USD on the upside.

Wedge, Double-Top Risk and Level-by-Level Map on GBP/USD

Technically, GBP/USD is juggling two narratives: continuation and exhaustion. The continuation story is built on higher highs and higher lows, the rising 9-day and 50-day EMAs, and the upward wedge. The exhaustion risk is concentrated at 1.3850–1.3869 and in the 75 RSI reading. On the topside, the key layers are 1.3850–1.3860 as immediate intraday resistance, 1.3869 as the September 2021 high, 1.3852 / 1.3898 / 1.3950 as tactical short-interest bands watched by intraday desks, 1.3900 as a round-number magnet, 1.3910 as the wedge ceiling, 1.3925 as an objective from the 1.3750–1.3850 range extension, then 1.4000 and, further out, 1.4248 from April 2018. The 1.3850–1.3869 area is particularly important because a clean failure there combined with a break below 1.3747 would complete a bearish double-top structure. On the downside, buyers currently lean on 1.3770, 1.3747 and 1.3708 as intraday demand pockets, with 1.3750 as the psychological pivot. Below that, support steps down to 1.3667 (9-day EMA), 1.3610 (wedge base), 1.3580 (100-period 4H average), 1.3486 (prior resistance pivot) and 1.3461 (50-day EMA). As long as GBP/USD trades above 1.3708–1.3667 and holds the wedge base around 1.3610, any setback is a correction inside an uptrend rather than a full top.

Intraday Behaviour and Wave Structure Behind the GBP/USD Rally

The advance from the early-November low has the proportions of a cleaner impulsive wave set, which matches the strength seen in spot. From the November 5 trough, wave ((i)) pushed to 1.3568, followed by a retracement to 1.3340 in wave ((ii)), built as a three-leg zigzag with wave (a) at 1.3390, wave (b) at 1.3495 and wave (c) at 1.3340. That reset allowed a fresh leg higher in wave ((iii)). From 1.3340, wave (i) capped near 1.3491, wave (ii) corrected to 1.3400, and wave (iii) extended sharply to 1.3869. The pullback to 1.3749 fits wave (iv), and price is now likely working through wave (v) of ((iii)), which naturally targets the 1.3900–1.3925 band. Once that top is in place, a deeper wave ((iv)) correction could drag GBP/USD back toward 1.3700–1.3667 without invalidating the larger bullish structure, provided 1.3610 and 1.3461 hold on a closing basis.

Sentiment, Heat Map and Relative Strength of GBP Versus Majors

Sentiment indicators line up with the chart story. The daily currency heat map shows GBP as the strongest performer against USD on the day, up 0.26%. At the same time, USD is broadly offered: down 0.34% versus EUR, 0.27% versus CAD, 0.83% versus AUD, 0.59% versus NZD, and 0.50% versus CHF. GBP only underperforms high-beta AUD and NZD, which typically outperform when risk appetite improves. That mix is what a textbook “sell dollar, rotate into alternatives” environment looks like, and GBP is firmly inside the beneficiary group. This is consistent with risk-reversal pricing that favours sterling calls and with spot action where every test of 1.3750 is met by buyers rather than liquidation.

Trading Logic on GBP/USD: Where the Risk–Reward Still Makes Sense

From a trading standpoint, GBP/USD is a bullish but stretched market. Trend, moving averages and positioning argue for more upside, but momentum signals and resistance clusters argue against chasing at 1.3850+. The cleaner logic is buy-the-dip instead of buying the breakout. The attractive demand pocket sits in the 1.3770–1.3747 area, with tolerance down to 1.3708 if volatility widens the pullback. That region lines up with intraday demand, the prior breakout zone above 1.3750 and the internal structure of the wedge. As long as price stays above 1.3708–1.3667 and the wedge base at 1.3610, the dominant view remains that dips are corrective pauses in a move whose natural continuation targets 1.3869, 1.3900, 1.3925 and eventually 1.4000 and 1.4248. A daily close below 1.3747 followed by a sustained break under 1.3708 would give the double-top scenario real weight and open a path toward 1.3667, 1.3610 and 1.3580, with 1.3486–1.3461 as the medium-term bear objective.

Directional Call on GBP/USD: Bias, Rating and Risk Line

Taking all the numbers into account – spot near 1.3830–1.3850, DXY parked around 96.00, Fed funds at 3.50%–3.75% under political scrutiny, three-month GBP risk reversals grinding less negative, EMAs stacked bullishly at 1.3667 and 1.3461, resistance ladders at 1.3869, 1.3925, 1.4000 and 1.4248, and support bands at 1.3770–1.3747 and 1.3708–1.3667 – the directional stance is clear. The pair is a Buy with a bullish label, but with disciplined execution: accumulation on pullbacks into 1.3770–1.3747 with risk defined below 1.3667–1.3610, rather than aggressive longs at 1.3850+. Only a decisive failure below the wedge base and the 50-day EMA around 1.3461 would downgrade GBP/USD from buy-the-dip to neutral or outright sell.

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