GBP/USD may be overextended in the short term

Summary:

GBP/USD is trading near 1.340 – 1.342 after the pair reached multi-week highs. Recent price action shows the pound losing steam as markets price in a Bank of England (BoE) rate cut while the US dollar may find support amid hawkish repricing after the Federal Reserve’s latest policy and macro data shifts...

Sell GBPUSD

EXP

Trading

1.33950

ENTRY

1.33200

TGT

1.34450

1.33651 -0.00056 -0.04%

Point

Flat

1.33200

TGT

CLOSING

1.33950

ENTRY

1.34450

Overview

GBP/USD recently climbed toward 1.3400+ on the back of broad USD weakness following the Federal Reserve’s December rate cut and softer guidance, which initially pressured the greenback lower. However, price action appears to be stalling just under psychological resistance after several attempts to clear higher levels. Markets are now heavily focused on UK growth indicators and speculation around the BoE’s next move, with a Reuters poll showing a BoE rate cut widely expected at their upcoming meeting as inflation eases and economic growth slows.

Meanwhile the US dollar, though weaker post-Fed, may regain traction if macro data surprises to the upside or if risk sentiment shifts back toward safe-haven demand. Recent trading ranges show GBP/USD dancing around 1.3350 – 1.3439.The combination of an impending BoE cut and a potentially resilient USD sets a context where sterling’s recent gains may be retraced rather than extended.

Market sentiment

Investor sentiment toward GBP/USD is mixed and leaning cautious. Although the pound has recently strengthened and hit multi-week highs, analysts and forecasts point to mounting UK economic concerns particularly slowing labour data, weak growth signals, and the looming probability of BoE easing.

This has weakened longer-term bullish conviction and increased scrutiny on the pair’s ability to sustain higher levels. Meanwhile, the recent Fed rate cut, although dovish in headline terms, was accompanied by commentary hinting at a more data-dependent outlook, which could support the USD if upcoming US data surprises positively.

Furthermore, nearly half of UK firms report high GBP volatility impacting operations, which reflects broader market discomfort with sterling’s rally and may contribute to bearish positioning.

In this environment, short-term traders may treat current peaks as corrective, positioning more aggressively on breaks back down rather than chasing further upside.

Technical analysis

GBP/USD may be overextended in the short term_1

GBP/USD appears to be running into resistance near the upper Bollinger band after a series of marginal rallies into the 1.3400–1.3430 zone. Price failing to consistently close above this upper band suggests that bulls may be struggling to sustain momentum, with potential for a mean reversion back toward the mid-band around the 1.3360–1.3370 area. Ichimoku (9,26,52) on M15 would likely reflect price approaching or slightly above the Kumo cloud with Tenkan-sen and Kijun-sen flattening, indicating a loss of short-term bullish acceleration and a setup where downward pressure could emerge if price crosses back below those lines. A Stochastic (5,3,3) reading that has been in overbought territory or showing a bearish crossover near resistance would further confirm weakening upward momentum and increase the probability of a short-term dip. Together, these signals on the M15 chart imply that a push lower toward support zones is a technically reasonable expectation if bearish confirmation appears near current levels.

Trade idea

Entry: 1.3395

Take Profit: 1.3320

Stop Loss: 1.3445

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Rank

Articless

219

Win Rate

50.52%

P/L Ratio

1.29

Focus on

EURUSD, AUDUSD

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