19.10.202613:34 Forex Analysis & Reviews: GBP/USD – Price Analysis and Forecast: The Pound's Upward Potential Remains Limited Despite a Short-Term Recovery

At the start of the new trading week, GBP/USD is rebounding from the key 1.3300 level, temporarily pausing the corrective move that began on Friday following the establishment of a new October high, with the previous comparable price level recorded on September 23. However, the upward momentum failed to develop further. The pair has now fallen below 1.3340, showing little change on the day. This reflects reduced selling pressure on the US dollar.

Last Friday, the US dollar declined significantly, reaching a new October low and ending a four-week winning streak. The move was triggered by a sharp drop in US Treasury yields, which had previously reached multi-year highs. Another factor weighing on the dollar was the lack of clear signals from Federal Reserve officials regarding the next steps in monetary policy. This reduced expectations of monetary tightening at the end of the current month. As a result, the impact of inflation data that came in significantly above forecasts was offset, forcing dollar bulls to adopt a defensive stance.

Despite this, market participants continue to assign a probability of more than 90% to a Federal Reserve rate hike in December. This assessment is largely driven by inflation risks associated with rising energy prices. On Friday, crude oil prices reached new monthly highs amid escalating geopolitical tensions in the Middle East.

On Sunday, reports emerged from Iran's Islamic Revolutionary Guard Corps (IRGC) that an oil tanker had caught fire and subsequently exploded in the Strait of Hormuz after striking a sea mine.

Furthermore, Mohsen Rezaei, Secretary of Iran's Supreme National Security Council, stated that Tehran was preparing new measures in response to possible aggression by the United States or Israel. This continues to sustain the geopolitical risk premium, providing some support for the US dollar as a safe-haven asset and, consequently, limiting GBP/USD's upward potential. At the same time, growing expectations of a 25-basis-point Bank of England rate hike in November should support the British pound and limit downward pressure on the currency.

From a technical perspective, GBP/USD continues to trade below the 100-day simple moving average (SMA), currently located at 1.3390. This maintains the prevailing bearish bias despite the recent short-term upward momentum. The nearest resistance zone is formed by the 1.3340 level and the 100-day SMA, suggesting that further gains will be difficult to sustain while spot prices remain constrained by this strong resistance area.

On the other hand, initial support is located at the 1.3265 retracement level, which coincides with the 9-day exponential moving average (EMA). More significant support levels are found at 1.3200 and 1.3180, the October low. The oscillators are giving mixed signals, while the Relative Strength Index (RSI) has moved into positive territory, giving the bulls an opportunity to gain momentum.