On Monday (April 7) during the Asian trading session, the GBP/USD pair experienced some buying support after slipping to a more than one-month low in the 1.2820 area, and it has now rebounded to around 1.2850. However, the sustained pressure on the global economic outlook continues to lack enough support for upward momentum, leaving the exchange rate in a state of consolidative fluctuation.
Interwoven Impact of Fundamental Factors
Recently, U.S. President Trump announced large-scale reciprocal tariff measures, sparking concerns of escalating trade tensions. Investors worry that this move will undermine global economic growth prospects, leading to increased risk aversion and boosting the dollar's status as a safe-haven currency, which in turn pressures the pound.
However, the market is also starting to expect that tariff policies will suppress U.S. business activity, possibly forcing the Federal Reserve to restart a rate-cutting cycle. The market currently anticipates four rate cuts by the Fed in 2025. This expectation has made dollar bulls cautious, while promoting a significant decline in U.S. Treasury yields, weakening the dollar's performance.
Conversely, the pound is supported by market expectations that the Bank of England will maintain relatively high interest rates, with the market believing that the UK will be slower than the Fed in reducing rates, providing some fundamental support for the pound.
Technical Structure Indicates Potential Rebound
Looking at recent price movements, the GBP/USD pair, after a strong rebound last month reaching a high of 1.3206, has retraced and is currently in a phase of technical adjustment. The MACD indicator has turned negative with the histogram extending downward, suggesting a strengthening of bearish forces in the short term.
The Bollinger Bands indicator shows prices near the lower band, with the market in a slightly oversold state, which typically means a technical rebound might occur in the short term. The 1.2850 level is currently a key support; holding this level could enable another challenge towards the 1.2900 and 1.2940 range, the latter also being around the middle Bollinger Band, providing short-term resistance.
On the daily chart, the GBP/USD pair has exhibited a V-shaped reversal pattern since the January low of 1.2099, having successfully broken and confirmed the neckline at 1.2700, with the target upgraded to the 1.3300 area. The medium-term technical trend remains in positive territory, with the upper Bollinger Band at 1.3074 serving as significant medium-term resistance.
The RSI indicator is currently at 30.04, approaching the oversold edge, also providing some potential for a short-term price rebound.
Divergent Outlook Ahead
Bullish Outlook: If the exchange rate stabilizes above 1.2900, it may further rise to 1.2940, 1.3060, or even return to the high region of 1.3206, depending on whether strong buying support emerges.
Bearish Outlook: If the exchange rate falls below 1.2850, it may once again test the 1.2820 support level. A break below this point could target the previous breakout region of 1.2700, with further declines potentially triggering technical sell-offs.
Overall, the GBP/USD movement is at a crucial technical range, with market sentiment swinging between risk aversion and easing expectations, and the short-term direction is likely to be further driven by macroeconomic data and policy expectations.
