GBP/USD has cleared the 1.3500 barrier and is consolidating above a broken long-term descending trendline, a move analysts read as more durable than earlier tests of that ceiling. A softer US inflation print has drained momentum from the Dollar, while the Pound holds up as one of the stronger major currencies.
The current push in GBP/USD looks more persistent than the familiar tests of a ceiling that came before it, with the Pound holding its ground while the Dollar loses value. What matters is not only that the pair moved higher, but that the breakout looks firm and that markets are increasingly pricing in persistent Sterling strength.
Why the Dollar Is Losing Support
The pair moved through a long-watched level as the Dollar lost support from the US inflation story. A softer-than-expected US inflation print pushed traders to reassess how aggressive the Federal Reserve is likely to be in the near term, draining momentum from the Dollar across the board. The CME FedWatch tool has cut its estimate of the chance of rate hikes this year.
The Pound, by contrast, is increasingly treated as one of the stronger major currencies. That view is helped by the sense that the UK economy has held up better than expected and that the Bank of England still sits in a relatively hawkish position versus other central banks. Markets appear to be pricing the Bank of England keeping Bank Rate unchanged at 3.75% after a 7 to 2 vote to hold in June, with inflation at 2.8% and a softening labour market.
The Levels That Now Matter
The breakout cleared not only the 1.3500 round number but also the horizontal resistance at $1.3489 and, maybe even more significantly, the broken descending trendline drawn from the two-month high. The pair is now consolidating bullishly above that trendline, and a retest of the broken line after a breakout can offer a strong long entry.
One resistance level still stands in the way. The barrier at $1.3550 has held so far, but if it breaks, there is no significant resistance expected until $1.3650 or so. Supporting analysis puts the pair trading at 1.3537 with an intraday high of 1.3559, above its 50-EMA and 100-EMA.
What Would Undo the Move
The next test is the hold, not the break. If the price retreats below $1.3500, or worse below $1.3489, the case for a structural shift weakens and bulls would need more evidence before pressing higher. As breakout scenarios with this pair go, this one looks relatively solid, but Forex setups can collapse quickly, so caution stays warranted.
Sources: DailyForex, FXEmpire
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