GBP/USD Price Forecast - Pound Slides Toward 1.34 Floor as Hot US Data and Fed–BoE Gap Hit Sterling

GBP/USD: Dollar Strength Pins Sterling Near 1.34 as Fed–BoE Divergence Widens

US Data Rebuilds Support Under the USD and Pressures GBP/USD

GBP/USD is trading around 1.3420, very close to its weekly low and the critical 1.3400 zone, after failing to hold early-week gains toward 1.3567, where a clear short-term top formed before a sharp reversal. The latest leg down is driven almost entirely by USD strength. A run of stronger-than-expected US data has reset Fed expectations and pushed the US Dollar Index (DXY) back to a four-week high around 99.00, while GBP has offered little resistance. The US side delivered a series of upside surprises: ISM Services PMI beat expectations, confirming ongoing expansion in the US services sector, with new orders and prices paid still elevated – a combination that keeps services inflation sticky. The ADP report showed private-sector hiring stronger than forecast, reinforcing the notion that labor demand is still resilient. Across the official labor data, one recent Nonfarm Payrolls print showed a headline gain of 50,000 versus 60,000 expected, but the unemployment rate fell to 4.4% from 4.5%, and average hourly earnings rose 3.8% year-on-year versus 3.6% expected. Another major jobs release highlighted 210,000 new jobs, underscoring how noisy but persistently firm the US labor market remains. The result is simple: markets have scaled back expectations for near-term Fed cuts. The probability of a March cut has dropped from above 70% to roughly 40%, US yields have moved higher, and the USD has repriced up across the board. That macro repricing is what pulled GBP/USD off 1.3567 and drove it into the 1.34 handle.

BoE Under Pressure as UK Data and Inflation Undermine Sterling

On the UK side, the story is the opposite. UK inflation has cooled to around 2.5%, just above the BoE’s 2% target, while the growth profile remains fragile. The upcoming UK GDP print will be watched closely, but unless it comes in significantly above expectations it only reinforces a familiar narrative: the BoE is under pressure to cut earlier than the Fed. That policy divergence – a Fed delayed by strong data versus a BoE dragged toward easing – is a structural headwind for GBP/USD. Markets already see UK as the weaker macro leg in the pair: softer inflation, lacklustre growth and fiscal concerns keep UK asset risk premia higher than the US. That is why, despite no major UK shock last week, GBP/USD has traded as a passenger to the US side and slid from above 1.35 to the 1.34 area.

DXY, Cross-Market Risk Tone and Why GBP Is the Weak Side

The broader USD backdrop reinforces the downside bias in GBP/USD. The US Dollar Index found strong support at a key Fibonacci level near 97.94, then built an ascending triangle from the Christmas lows and broke higher as the latest data hit. The break above the 98.85–99.00 resistance band has opened the way toward the heavy 100.00–100.22 resistance zone. As long as DXY trades above 98.85, the dollar has the technical and macro justification to stay bid. Cross-asset signals are risk-off: Gold trades around $4,500, a very high level given a firmer dollar and rising US yields, which confirms strong hedging and fear in the system. Crypto has rolled over, with Bitcoin struggling to sustain levels below $90,000, and the institutional appetite for high-beta risk is clearly fading. In that environment, high-beta currencies like GBP are naturally weaker against a defensive USD, and GBP/USD becomes a preferred short on any rallies rather than a buy on dips.

Short-Term Structure in GBP/USD: From 1.3567 Top to the 1.3400–1.3360 Support Band

Technically, the short-term picture in GBP/USD is clearly bearish. Price rejected 1.3567, which now stands as the key short-term top. Since then, the pair has slid below the 100-day moving average, and the 20- and 50-day moving averages have crossed lower, confirming a bearish alignment. The market is now sitting directly on top of the 1.3400 demand zone, with multiple layers of support below. Several independent maps converge on similar levels: intraday flows show the pair briefly dipping under 1.3400 and then rebounding to 1.3420, confirming that buyers are defending the first test of the figure but lack strength for a sustained reversal. Just beneath lies the 1.3360–1.3375 support band, highlighted by multiple desks, and the 55-day EMA around 1.3366 sits in the middle of that range. A broader cluster at 1.3355–1.3371 lines up with Fibonacci support identified elsewhere and sits just above the 200-day moving average near 1.3350. As long as 1.3567 caps the upside and price remains below the 100-day MA, rallies are corrective and the directional risk is still lower toward 1.3360–1.3350, not higher.

Medium-Term GBP/USD: From 1.3787 Peak to 1.3008 and the 1.2474 Fib Guardrail

Zooming out, GBP/USD price action from the 1.3787 high posted in 2025 is best read as a correction within the broader uptrend from 1.3051. The recent bounce to 1.3567 and failure there leaves the medium-term structure incomplete. If the 1.3366 EMA and the associated 1.3360–1.3350 zone break decisively, the current decline becomes another leg of that same corrective structure. In that scenario, the next obvious downside magnet is the 1.3008 support level, which has acted as a major floor in the broader pattern and aligns with previous swing lows. Beyond that, the deeper corrective guardrail is the 38.2% retracement of 1.0351–1.3787 at 1.2474. As long as the downside is contained above 1.2474, the larger medium-term uptrend from the post-1.0351 recovery remains intact, even if the pair trades through a multi-figure correction. The truly long-term picture stays bearish for sterling as long as the 1.4248–1.4480 resistance zone – tied to the 38.2% retracement of 2.1161–1.0351 at 1.4480 – caps any major recovery. In that framework, price action from 1.3051 is still only a corrective structure within a long-term downtrend that started from 2.1161, not a full secular reversal.

Intraday Levels, Flows and the 1.3400–1.3535 Tactical Range

From a trading perspective, the intraday and short-horizon structure is defined by a compression between support in the 1.3400–1.3360 band and resistance in the 1.3500–1.3567 zone. One desk projects GBP/USD trading in a 1.3400–1.3535 range as upside risks gather but strong support is not yet expected to break. Another highlights 1.3414 as a key Fibonacci level; the recent dive through that area followed by a bounce to 1.3420 confirms that it has shifted from respected support to a level that can be probed and overshot in a bearish phase. On the topside, the first resistance for any rebound sits around 1.3450, where the 20- and 100-day moving averages are beginning to converge, followed by the 1.3500 psychological level. Above that, 1.3567 is the pivot that defines the current bearish swing; only a sustained break back above 1.3567 would neutralize the immediate downside bias and reopen the way toward 1.3787. Until then, every approach toward 1.3500–1.3567 is vulnerable to renewed selling.

Event Risk: US CPI, PPI, Retail Sales and UK GDP as Short-Term Catalysts

The next decisive directional impulse for GBP/USD will come from data rather than technicals. On the US side, CPI, PPI, and retail sales will either validate or challenge the strong-dollar narrative. If US CPI remains close to the prior 3.5% year-on-year reading or surprises higher, and PPI and retail sales hold firm, the market will push Fed cuts further out, keep yields elevated and likely break GBP/USD below the 1.3360–1.3350 block, opening room toward 1.3008 over time. Conversely, if inflation cools and consumer demand clearly softens, the dollar may give back some gains, allowing GBP/USD to retrace toward 1.3450, 1.3500, or even retest 1.3567, though any such move still runs into the structural UK weakness and BoE cut risk. On the UK side, the GDP release can only help sterling if it significantly beats expectations; a soft or even middling number will simply reinforce the view that the BoE is closer to easing than the Fed, limiting any upside reaction in GBP/USD.

Bias and Verdict on GBP/USD: Short-Term Bearish, Medium-Term Corrective, Pair Favored as a Sell-on-Rallies

Putting the macro, cross-asset and technical pieces together, GBP/USD near 1.3420 is not an attractive long. The pair sits just above a dense support band but the weight of evidence – strong US data, delayed Fed cuts, a DXY grind toward 100.00–100.22, weaker UK macro and a clear bearish alignment in the moving averages – argues that risk is skewed to the downside while the market trades below 1.3567. The tactical stance is bearish / sell-on-rallies: strength into 1.3450–1.3500 and, especially, 1.3500–1.3567 is more likely to be sold than sustained, with targets first at 1.3360–1.3350, then 1.3300, and potentially 1.3008 if US data continues to surprise on the upside and DXY pushes through 100.22. Medium term, the broader move remains a correction within the post-1.0351 recovery, with 1.2474 as the key retracement floor. Long-term, the picture only turns structurally bullish for sterling if GBP/USD can ultimately break and hold above the 1.4248–1.4480 resistance band, which is not on the table as long as the current US–UK policy divergence and growth gap remain in place.

That's TradingNEWS