This currency pair saw something of a reversal in recent weeks after it started to make an exciting breakout into blue sky, which ended up failing. As the failure was significant, it started to look like this currency pair might be interesting for new reasons – in Forex, a failure to complete can be a significant event by itself.
The price did initially move lower, but this move is starting to look as it if has run out of momentum and may be starting to reverse. The doubt this is sowing is causing analysts and traders to reassess their view of the GBP/USD currency pair.
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Why GBP/USD Is Starting to Look More Bullish
The major change going on right now within this currency pair is a reassessment of the US Dollar. News and surprises concerning the greenback since about 19th August were all hawkish / bullish.
Strangely, despite last Friday’s much stronger than expected US jobs (non-farm payrolls) data, this slightly less hawkish sentiment on the US Dollar saw last week print a decline in the Dollar, and expectation of the rate hike has fallen slightly. Even renewed fighting between the USA and Iran in the Strait of Hormuz and its environs has not been able to change this.
Concerning the British Pound, markets are noting hawkish signals from the Bank of England: the Chief Economist at the Bank has begun arguing for a rate hike in the near term, while markets have begun expecting two rate hikes within the next six months. Finally, the higher price of Crude Oil is expected to feed more into British than American inflation.
So, there are good reasons why we are seeing a reassessment of this pair from bearish to potentially bullish.
GBP/USD Technical Analysis: Higher Low, Broken Price Channel
We are seeing a fairly textbook shift from bearish to bullish, with the price chart below showing a descending price channel in the form of a linear regression analysis holding for almost the last two weeks, sending the price from near its six-month high down to support below 1.3500.
Last Thursday, the price made a firm bullish thrust which took it out of this descending price channel, and then the price action pulled back, but printed a first higher low by rejecting the support level I had identified at 1.3491. There was then another bearish pullback, which rejected resistance very confluent with the big round number at 1.3500, and that was the higher low.
We now see the price rising quite bullishly early in today’s London session – typically a time when this currency pair finds direction significantly - threatening the support confluent with 1.3550, which has been important recently.
There is a long-term bullish trend, which is probably helping the short-term bullish shift.
On the bearish side, resistance near 1.3550 and 1.3570 could be a stern test for bulls. These levels have formed with decisive price action.
GBP/USD H1 Price Chart Showing Bullish Breakout
H2 Behavioral Blind Spot / Unresolved Risks
The bullish reassessment risks overlooking a critical vulnerability: retail traders are now anchoring to the Bank of England rate-hike narrative while simultaneously underestimating the durability of dollar weakness. The Fed's recent tone—suggesting potential pause in rate hikes—has temporarily masked ongoing structural dollar demand from equity volatility hedging and Treasury flows. Should US inflation data surprise to the upside in the coming week, or should Fed speakers reinforce hawkish positioning, dollar strength could resume sharply, catching sterling longs caught between an exhausted bearish setup and a premature bullish pivot. Additionally, the higher-low pattern itself masks a distributional risk: the recovery has occurred on lower volume than the initial breakdown, suggesting that institutional sellers may be lightening positions ahead of clearer directional signals rather than aggressively accumulating. This indicates an anomaly in the bullish consensus—real money may be stepping aside, not stepping in.
H2 Invalidation Parameters
The bullish structure would be invalidated decisively if GBP/USD closes below 1.3420 on the daily timeframe, negating the higher-low pattern and re-establishing the bearish channel breakdown. Such a close would eliminate the technical foundation for bullish conviction and likely trigger fresh short-covering reversals, particularly if coupled with a hawkish Fed statement or USD strength catalyst.
GBP/USD is now testing a critical technical juncture where higher lows and a broken descending channel challenge bearish positioning, even as Bank of England rate signals and dollar weakness reshape the fundamental backdrop for sterling upside. The next 24 hours in London and New York sessions will be decisive: watch how price behaves at 1.3550 and whether it can sustain above the descending channel. The BoE hawkish messaging is fresh, but its durability against USD strength will define the pair's direction through month-end.
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