During the Asian trading session on Friday, the GBP/USD pair ended its four-day consecutive rally, retreating to trade near the 1.3430 level. The US dollar remained firm, supported by safe-haven demand, putting pressure on the pound and prompting a pullback.
Market sentiment continues to be primarily driven by the situation in the Middle East. Although Israel has indicated it will initiate direct talks with Lebanon, military operations persist, raising the risk of further escalation in the conflict. Simultaneously, the United States has emphasized that it will maintain its military deployment until Iran fully complies with agreements, leading markets to adopt a cautious stance regarding the stability of any ceasefire.
Furthermore, potential long-term agreement negotiations between the US and Iran are set to take place over the weekend. However, differing interpretations from Iran regarding ceasefire conditions, particularly concerning Lebanon, have increased market uncertainty. Against this backdrop, safe-haven capital is flowing into the US dollar, weighing on the British pound.
On the macroeconomic front, market focus is centered on the upcoming release of US March CPI data. Inflation is anticipated to rise year-on-year to approximately 3.3%, driven by increasing energy prices. This data will directly influence market expectations for the Federal Reserve's interest rate path, thereby impacting the dollar's trajectory. Should inflation exceed expectations, the dollar could strengthen further, potentially extending the GBP/USD decline; conversely, lower-than-expected figures could trigger a rebound for the pair.
In the UK, Bank of England Governor Andrew Bailey warned that the Middle East conflict could trigger financial risks reminiscent of 2008, especially against a backdrop of rising stress in private credit markets. This statement highlights potential vulnerabilities within the global financial system and has, to some extent, dampened risk appetite for the pound.
From a daily chart perspective, the GBP/USD pair has encountered resistance after its consecutive gains, entering a phase of technical correction. The failure to decisively break above previous highs indicates significant selling pressure at higher levels. While the price remains within an ascending trend channel, momentum has weakened. The 1.3380 area provides initial support; a break below this level could lead to a further retreat towards the 1.3300 mark. Conversely, 1.3500 serves as a key resistance level; a break above it could open the door for further upward movement. Technically, the RSI has retreated from overbought levels, and MACD momentum has weakened, signaling a cooling of bullish strength.
On the 4-hour chart, the short-term structure has shifted to a consolidation with a bearish bias. The pair has broken below short-term moving average support, forming a minor descending channel and suggesting strengthening bearish momentum. The vicinity of 1.3400 currently acts as a short-term pivot point. Sustained pressure below this level could lead to a test of the 1.3350, or even the 1.3300, area. The 1.3460–1.3480 range constitutes short-term resistance overhead. Technical indicators show the RSI trading below 50 and the MACD having moved below the zero line, providing clear short-term bearish signals.
Overall, the GBP/USD exhibits short-term weakness while maintaining a medium-term consolidation pattern. Should the dollar strengthen due to inflation data, the pair could test key support levels further; otherwise, it may resume its upward trajectory within the existing channel.
The current movement of the GBP/USD is primarily dictated by the US dollar's performance. Geopolitical risks and inflation expectations are bolstering the dollar, while risk warnings from the UK are additionally suppressing the pound. Technical analysis indicates rising short-term adjustment pressure, with markets awaiting the US CPI data as a key catalyst for directional movement. In the near term, close attention should be paid to the breach of the support zone around 1.3380 and the resistance zone around 1.3500.
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