GBP/USD Outlook: The 38.2% Fibonacci retracement serves as a major resistance around 1.3470

GBP/USD Market Overview

GBP/USD is currently trading down by 0.2%, hovering close to 1.3400 during the late hours of the Asian session on Friday. The pair is experiencing downward momentum as the US Dollar Index (DXY) recovers following a significant drop of over 1% the previous day.

At the time of reporting, the Dollar Index has climbed 0.3% to approximately 99.45, rebounding from Thursday’s weekly low near 99.00.

The US Dollar saw a steep decline after several central banks around the world indicated that rate cuts are off the table, citing persistent inflation concerns fueled by rising oil prices amid ongoing tensions in the Middle East.

The British Pound surged on Thursday after the Bank of England (BoE) opted to keep interest rates unchanged at 3.75%. The decision was unanimous among all BoE Monetary Policy Committee members, contrary to expectations of a split vote.

According to a Reuters report, market participants anticipate the BoE will implement two 25 basis point rate hikes this year, as inflation in the UK is projected to remain above the 2% target for the foreseeable future due to elevated energy costs.

Technical Outlook for GBP/USD

In Friday’s Asian session, GBP/USD dropped to around 1.3405. The short-term trend has shifted to a slightly bullish stance, with the pair attempting to stay above the 20-day Exponential Moving Average, which is positioned just above 1.3400. Despite this, the currency pair continues to follow a broader downward trajectory from the 1.3868 peak, struggling to break past the 38.2% Fibonacci retracement level at 1.3467.

The 14-day Relative Strength Index (RSI) has moved into the 40.00-60.00 range from the previous 20.00-40.00 zone, suggesting that the recent bearish momentum has eased, though the overall downward pattern remains intact.

• Key resistance is found at the 38.2% Fibonacci retracement level of 1.3467. A daily close above this point could pave the way toward 1.3546, which marks the 50.0% retracement.
• On the support side, immediate backing is at the 23.6% retracement level of 1.3375, followed by the recent swing low near 1.3320. A break below this area would expose the 1.3223 level and signal further downside.

(This technical analysis was assisted by an AI tool.)