Hidden Divergence at Resistance Could Trigger a Pullback in GBPUSD

Summary:

If sellers continue to defend this level and the pair fails to establish a sustained move above it, a bearish rejection could create opportunities for a pullback

Sell GBPUSD

EXP

Trading

1.33976

ENTRY

1.32050

TGT

1.34800

1.34064 +0.00077 +0.06%

Point

Flat

1.32050

TGT

CLOSING

1.33976

ENTRY

1.34800

Iranian Foreign Minister Abbas Araghchi said on Wednesday that the United States must lift its naval blockade and demonstrate that it is serious about ending the war through diplomatic means, Bloomberg reported. His comments indicate that Tehran remains open to negotiations, although progress will depend on whether Washington is willing to change its current approach and provide assurances that a diplomatic solution remains possible.

“Iran is ready to give diplomacy another chance if we see concrete evidence of a sincere desire on the part of the US to reach a fair and honorable solution to permanently end this conflict,” Araghchi said. According to Fars News, the Iranian official also threatened to target US political figures if American attacks resume. These statements highlight the continued uncertainty surrounding the conflict, as the possibility of renewed negotiations remains alongside the risk of further escalation.

Meanwhile, there was a potentially positive development regarding the war between Russia and Ukraine, as the Kremlin agreed that another round of trilateral talks involving the United States, Russia, and Ukraine could take place in Abu Dhabi. The possibility of renewed discussions offers some hope for diplomatic progress, although the outcome remains uncertain and will depend on whether the parties can reach common ground on the main issues separating them.

Recent comments from Federal Reserve officials also suggest that policymakers remain open to additional monetary tightening, although they have not firmly indicated that interest rates will be raised at the October 27–28 meeting. Speaking in Bangkok on Friday, Fed Chair Kevin Warsh maintained his position of avoiding forward guidance, stating, “I do not prejudge meetings.” His remarks leave the timing of any potential rate increase uncertain, reinforcing the importance of upcoming economic releases and inflation data in shaping expectations for the Fed’s next policy decision. Persistent energy-related inflation could strengthen the case for further tightening, although the final decision will depend on how incoming data influence the central bank’s assessment of price pressures.

In the United Kingdom, the Office for National Statistics (ONS) reported that headline Consumer Price Index (CPI) inflation increased by 3.5% year over year, exceeding both the 3.4% market forecast and August’s reading of 3.1%. Core CPI, which excludes the more volatile components of food, energy, alcohol, and tobacco, also accelerated, rising by 2.8% year over year compared with expectations of 2.7% and the previous reading of 2.6%. The stronger figures suggest that inflationary pressures remain persistent, potentially complicating the Bank of England’s decisions regarding the future direction of monetary policy.

The inflation data follow the latest UK employment report, which showed a modest increase in wages alongside other signs of resilience in the labor market. Continued wage growth could contribute to persistent domestic inflationary pressures, particularly if labor costs remain elevated. Together, these developments leave policymakers facing the challenge of assessing whether inflation will gradually ease or remain above the desired level for longer than expected.

Earlier this month, Healey stated that the upcoming budget would strengthen the United Kingdom’s resilience to the impact of the war with Iran on energy prices and provide the country with “a little more room for maneuver.” Healey is scheduled to present his first budget next week, making the announcement an important event for investors assessing the government’s response to rising energy costs and the broader economic outlook. The budget could also provide further insight into the government’s fiscal priorities as uncertainty surrounding geopolitical developments continues to affect the market environment.

Investors will now turn their attention to the UK Retail Sales data for September and the preliminary S&P Global Purchasing Managers’ Index (PMI) readings for October, both scheduled for release on Friday. These indicators could provide further insight into the strength of consumer demand and business activity, helping markets assess whether the UK economy remains resilient despite persistent inflation and uncertainty surrounding energy prices. Hidden Divergence at Resistance Could Trigger a Pullback in GBPUSD_1

Hidden Divergence at Resistance Could Trigger a Pullback in GBPUSD_1

Technical Analysis

GBPUSD has encountered resistance at 1.3404, a level the pair has struggled to break decisively to the upside. This area also coincides with the 0.60 Fibonacci retracement level, adding further technical significance to the current resistance zone. If sellers continue to defend this level and the pair fails to establish a sustained move above it, a bearish rejection could create opportunities for a pullback toward local support at 1.3204. Meanwhile, the 100-period and 200-period moving averages remain below the current price, positioned at 1.3256 and 1.3326, respectively. A close below the 200-period moving average could increase selling pressure and accelerate the downside correction, particularly if bearish momentum continues to build.

Looking at the oscillators, the RSI recently reached 74, entering overbought territory. These readings are particularly notable because similar levels have not been observed recently, including on September 9, when the price was trading considerably higher but the RSI readings were lower. This divergence between price and momentum could indicate that bullish strength is fading, increasing the possibility of a corrective move lower. Meanwhile, the MACD displays a bullish histogram that is rapidly losing depth, suggesting that upward momentum is weakening. However, the signal lines remain firmly within bullish territory, meaning that the broader bullish structure has not yet been invalidated. Therefore, any decline from the current resistance zone should initially be treated as a potential correction rather than a confirmed trend reversal. A sustained rejection at 1.3404, followed by a break below the moving averages, would provide stronger confirmation of further downside potential.

Trading Recommendations

Trading direction: Sell

Entry price: 1.3396

Target price: 1.3205

Stop loss: 1.3480

Validity: Nov 03, 2026 15:00:00

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