Sterling rallied modestly on Friday as softer U.S. data and a dovish Fed outlook contrasted with a comparatively firmer BoE stance. GBP/USD’s rebound from its late-September lows reflects ongoing interest-rate divergence, yet lingering UK fiscal risks temper enthusiasm for an extended breakout.

Macro Context

• Fed vs BoE: U.S. policy is priced for deeper easing into 2025–26, reinforcing downside pressure on the dollar.
• UK Backdrop: Persistent inflation keeps the BoE cautious, even as growth lags. Any hint of dovish pivot—particularly from MPC doves—could weigh on GBP via gilt yield volatility.
• Market Sentiment: The U.S. government shutdown has curbed data flow, reducing volatility across FX. Commentary from Fed speakers will be closely parsed for clarity on rate trajectory.

Technical Framework

• Support Levels:
  • 1.3430 – short-term pivot.
  • 1.3418 – cloud base offering structural support.
  • 1.3362 – lower Bollinger Band and key downside guardrail.
• Resistance Levels:
  • 1.3485–1.3505 – initial resistance zone.
  • 1.3526 – October 1 swing high; breakout target.
  • 1.3660–1.3787 – major resistance cluster (September and July highs).
• Trend Indicators: Price is consolidating just beneath the 21-DMA, signaling latent bullish energy. RSI is rising, confirming improving momentum. Bollinger Bands are contracting, implying an impending volatility expansion.

Strategic View

• Bullish Scenario: Sustained closes above 1.3525 would validate breakout strength and re-target 1.3660–1.3787, aligning with the upper edge of the summer range.
• Bearish Scenario: Failure to defend 1.3430–1.3418 would shift momentum lower, exposing 1.3360, then 1.3324 (September trend low).

Conclusion

Sterling’s technical tone is cautiously bullish, supported by policy divergence and soft U.S. data. However, traders should remain mindful of fiscal headwinds that could limit upside beyond 1.35–1.36 until clarity emerges from the Autumn Budget.

Summary:
GBP/USD has regained near-term traction on softer U.S. data and Fed-BoE divergence. Immediate focus lies on 1.3505–1.3526 resistance; a decisive breakout above this zone would extend the recovery toward 1.3660/1.3787, while support at 1.3430–1.3418 remains critical to preserve the bullish structure.