- The GBP/USD forecast remains tilted to the upside, aiming for 1.3925 as the dollar loses further after the FOMC meeting.
- Despite the rates on hold and Powell’s reminder of higher inflation, the dollar could not find buyers amid Fed independence concerns.
- Option markets reveal the highest negative level since last May for GBP 3-month risk reversals, suggesting further upside.
GBP/USD is slowly moving higher within a positive structure, aiming for the 1.3925 level. The price is oscillating between 1.3750 and 1.3850, but the momentum is shifting in favor of an upside break. Impulsive upside moves suggest buyers are in control on dips, and the risk skew remains pointed higher as long as the pair stays above the cited support band.
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On the dollar side, the backdrop is clearly negative. The US Dollar Index (DXY) trades near 96.00, close to multi-year lows, extending a two-week downtrend despite the Fed leaving rates unchanged. Moreover, Powell reminded that inflation is still above target.
Markets look through the hawkish tone and focus instead on political and institutional risks around Fed independence and the Trump administration’s unpredictable policy mix. This has driven a broad “goodbye America” narrative in FX, with investors steadily reducing exposure to US assets and favoring alternatives, including the British pound.
Options markets confirm this shift. Three-month risk reversals on GBP have risen to their least negative level since last May, signaling a meaningful tilt toward upside protection in the pound versus the dollar.
Spot has already reached its highest level against the US dollar since July last year, as the Greenback posts its sharpest weekly decline since April. Trump’s apparent comfort with a weaker dollar has reinforced the sell USD bias ahead of the Fed meeting.
GBP/USD Technical Forecast: Potential Correction Before Upside
The GBP/USD consolidates gains near the 1.3850 level with a demand zone and 20-period MA confluence at 1.3750, providing solid support. However, the extremely overbought RSI points to a potential pullback before further upside.
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The 1.3750 level now acts as a pivot point, and a break below it could gather further selling traction and target the 100-period MA near 1.3580. On the other hand, the upside could find interim resistance at yesterday’s highs of 1.3860 ahead of 1.3900 and then 1.4000.
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