GBP/USD Bulls in Control as Key Resistance Levels Give Way
Sterling continues its strong rally, reaching a fresh 2025 high at 1.2631 following weaker-than-expected U.S. retail sales data that reinforced expectations of a more dovish Fed. The pound has decisively moved above key Fibonacci resistance at 1.2571, signaling potential for further gains. The next upside targets include 1.2648 (100-week moving average) and the major retracement zone at 1.2767, marking the 50% retracement of the 1.3434-1.21 decline. A sustained close above 1.2620, the top of the daily Ichimoku cloud, would confirm the bullish trend and open the door to a test of early December highs near 1.28. On the downside, immediate support lies at 1.2550 (Friday’s low), followed by 1.2470 (rising 10-day moving average) and 1.2454 (daily cloud base).
The technical backdrop remains constructive as GBP/USD benefits from a combination of fundamental and technical tailwinds. The pound has steadily climbed off its early 2025 lows near 1.21, fueled by stronger-than-expected UK macroeconomic data, including GDP, industrial output, and services growth. Meanwhile, U.S. economic data has surprised to the downside, with both PPI and retail sales pointing to potential Fed easing ahead. Market positioning data shows GBP short positions are being unwound, with speculative longs increasing as traders anticipate further gains. Sterling’s resilience amid shifting rate expectations suggests that any near-term dips could be seen as buying opportunities.
Looking ahead, UK employment and earnings data on Tuesday, followed by CPI and PPI on Wednesday, will be key catalysts for GBP price action. If inflationary pressures remain elevated, expectations for Bank of England rate cuts may diminish, further bolstering the pound. Additionally, the unwinding of Trump trade-related risk premiums is contributing to lower U.S. yields, easing fiscal pressures and keeping the dollar on the defensive. As long as GBP/USD holds above 1.2550, the bullish bias remains intact, with potential for a run toward 1.28 in the coming weeks.