GBP/USD Buyers Target Higher Levels as Pound Extends Three-Day Rally
Market Overview
The British pound (GBP) is experiencing its third consecutive day of gains against the US dollar (USD), reaching its highest level of 2025 at 1.2527. This short-term recovery rally has been supported by a de-escalation in trade tensions between the US, Canada, and Mexico after last-minute negotiations averted a major tariff hike. The resolution provided a boost to risk sentiment, allowing currencies such as the pound to strengthen as the US dollar retreated from its recent highs. Despite the pound’s bullish momentum, market participants are awaiting further economic data and central bank updates before confirming the sustainability of the current rally.
Technical Analysis
GBP/USD remains firmly bullish on the daily timeframe, with buyers gaining stronger control after successfully breaking a descending trendline. However, the pair is now testing a key resistance level at 1.25227, which represents a critical decision point for further gains.
A sustained break above 1.25227 would reinforce bullish momentum, opening the door to the next resistance at 1.25972. If buyers maintain control beyond this level, further upside targets emerge at 1.26920 and 1.27966, aligning with the 127.2%, 161.8%, and 200% Fibonacci extension levels.
Momentum indicators support the bullish scenario. RSI is trending higher, reflecting continued buying strength. MACD remains in positive territory, confirming the ongoing bullish sentiment. However, moving averages signal mixed momentum, suggesting that traders should monitor potential pullbacks before further confirmation of a breakout.
If buyers fail to break above 1.25227, a short-term retracement could push GBP/USD back toward 1.24181, with further downside potential at 1.22488 if sellers regain control.
Key Technical Levels
- Resistance Levels: 1.25227, 1.25972, 1.26920, 1.27966
- Support Levels: 1.24181, 1.22488
Fundamental Factors Driving GBP/USD
Markets widely anticipate a rate cut, but more dovish signals from policymakers, particularly Governor Andrew Bailey’s remarks, could weigh on the pound more than expected. Any indication of an accelerated rate-cut timeline would likely limit further gains in GBP/USD.
Later in the session, traders will closely watch US economic releases, including:
ADP Employment Report, which provides insight into private-sector job growth.
US Trade Balance, assessing the country’s external demand trends.
US PMI Reports, offering a snapshot of business sentiment.
Additionally, a speech by Federal Reserve member Michelle Bowman could influence market expectations regarding the Fed’s monetary policy stance, further impacting the USD’s trajectory.
Conclusion
GBP/USD remains in a bullish phase, with buyers targeting a break above 1.25227 to extend gains toward 1.25972 and beyond. However, BoE’s rate decision on Thursday remains a major risk event, potentially limiting further upside if policymakers signal earlier-than-expected rate cuts.
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