GBP/USD Buyers Retreat from Three-Week Highs
Market Overview
The British pound (GBP) has retreated from its three-week high of 1.2440 against the US dollar (USD), as market sentiment shifted following comments by US President Donald Trump. His announcement of potential new tariffs targeting key industries such as semiconductors, pharmaceuticals, and steel has heightened concerns over escalating trade tensions, particularly with Canada and Mexico. The announcement supported a rally in the US dollar as a safe-haven asset, further pressuring the pound.
Technical Analysis
On the 4-hour chart, GBP/USD shows signs of buyer exhaustion after a steady rally. The pair has entered a consolidation phase, pulling back from its recent high at 1.25227. Sellers are now attempting to regain control, driving the price toward the immediate support level at 1.24255. A decisive break below this level could open the path for further declines, with subsequent targets at 1.23991 and 1.23654, which align with a key ascending trendline.
The recent pullback is still considered a corrective phase within the broader uptrend, as no clear evidence suggests a reversal in the current bullish structure. Momentum indicators, however, reflect growing selling pressure. The RSI has edged lower from overbought territory, while the MACD shows bearish divergence, hinting at waning bullish momentum.
For buyers to regain dominance, they must defend the 1.24255 support zone and propel the price back above the key resistance at 1.25227. A successful break above this level would signal the resumption of the bullish trend and target higher resistance levels.
Key Technical Levels
- Resistance Levels: 1.24626, 1.25227
- Support Levels: 1.24255, 1.23991, 1.23654
Fundamental Factors
Markets remain focused on diverging monetary policy paths among major central banks. The Federal Reserve is widely expected to hold interest rates steady, maintaining its cautious stance amidst global economic uncertainties. Conversely, the European Central Bank is anticipated to implement a 25-basis-point rate cut in its upcoming meeting, reflecting concerns over economic weakness in the euro area.
In the UK, stronger-than-expected PMI data has bolstered optimism about economic resilience. However, the Bank of England is still expected to lower rates in February, weighing on the pound. Trade policy uncertainties, particularly the potential for expanded US tariffs, continue to dominate sentiment and drive volatility in GBP/USD.
Conclusion
The pound remains in a corrective phase against the dollar, with sellers testing key support levels. While the broader uptrend remains intact, a break below 1.24255 would signal deeper corrections. Conversely, a move above 1.25227 would reaffirm bullish momentum.
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