FX.co ★ Crude | GBP/USD

The GBP/USD exchange rate experienced a technical rebound after falling to the 1.3342 level—a 38.2% Fibonacci retracement point. This level acted as strong support, driving the exchange rate higher and shifting market sentiment back in favor of the British pound. During Monday’s trading session, the pair climbed further, breaking above the 50% Fibonacci retracement resistance level at 1.3404. Should the exchange rate face rejection at this key pivot point of 1.3404 and turn lower, it would favor the US dollar and potentially trigger a new round of declines, leading to a retest of the 1.3342 level. Conversely, if the exchange rate manages to hold above 1.3404, it would open the door for further gains, with buyers targeting the resistance zone between 1.3454 and 1.3469. Structurally, the overall market pattern remains clearly bullish; the recent pullback failed to break below the previous structural low, while the preceding rally successfully breached a prior high—confirming that buyers remain in control of the broader trend. Market participants have largely priced in the Federal Reserve’s current monetary policy outlook, whereas the Bank of England’s tightening cycle is still in its early stages. Therefore, once the current correction concludes, the British pound is expected to resume its overall upward trajectory. Although strong U.S. economic data on Friday provided a brief boost to sellers, the strength seen early Monday signals a structural shift in the market. Macroeconomic fundamentals continue to support the British pound. Following last week’s interest rate hike, the market widely expects the Bank of England (BoE) to maintain its tightening path. While most market analysts anticipate the next rate hike to occur in February, the possibility of another increase as early as the December meeting cannot be entirely ruled out. Overall, the Bank of England appears prepared to adjust its policy at a pace similar to that of the Federal Reserve and the European Central Bank. Nevertheless, policymakers are keenly aware of the need to avoid excessive tightening; an overly hawkish monetary policy could stifle broader economic growth without providing any additional benefit in addressing transitory inflationary pressures. Central bank officials generally expect inflationary pressures to subside over the coming year—implying that, unless "second-round" inflation effects become structurally entrenched, the pace of monetary policy tightening is likely to remain cautious. Intraday market volatility may also be influenced by a public address from Bank of England Governor Andrew Bailey, which could offer critical guidance regarding the BoE’s monetary policy decisions for December. The daily chart shows that the GBP/USD pair has rebounded significantly after touching the 1.3342 level, moving upward within a clear ascending channel. This technical movement aligns with a generally positive structural outlook, suggesting that the exchange rate is likely to advance further toward the upper resistance zone between 1.3469 and 1.3482 in the near term. Meanwhile, momentum indicators have yet to show clear bullish or bearish divergence signals across key timeframes. According to the latest Commitments of Traders (COT) report, bearish sentiment among non-commercial speculators has eased notably; they added 7,135 long positions while closing 12,458 short positions. Although short positions still outnumber long positions—approximately 124,000 contracts versus 64,000—the previous absolute dominance of the bears has begun to waver, driven by shifts in fundamental factors. Looking ahead, market direction will remain contingent upon the specifics of the Donald Trump administration’s trade policies, the policy divergence between the Federal Reserve and the Bank of England, and the geopolitical situation in the Middle East. While the market has recently priced in a reduced risk of escalation as diplomatic negotiations continue, a sudden breakdown in U.S.-Iran talks could reignite demand for the U.S. dollar as a safe-haven asset.