GBP/USD: Have Bulls Asserted Control?
This currency pair seems to have made a turnaround from falling steadily to long term lows, to making a fairly strong and impulsive rise, arguably gaining fuel from a failed bearish breakdown. In the Forex market, breakouts are often not decisive, and trends can be unreliable and hard to find. This suggests that the reversion to mean we are now seeing is a fairly typical and reliable Forex move.
It is important to note that this currency pair, again as is often typical in the Forex market, is being driven more by the US Dollar, which faces crucial data today, although the British Pound is one of the stronger major currencies in recent days and weeks. What are the likely scenarios when the market gets its data trigger later today?
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Today’s US Average Earnings, Non-Farms Data Release Might be Key Driver
Today brings one of the more high-impact US economic data releases which have a strong chance of affecting the US Dollar pairs in the Forex market like the GBP/USD. Average Hourly Earnings data is closely watched by the Federal Reserve, and if the number comes is significantly different from the expected month-on-month increase of 0.3%, this could push the market into recalibrating its rates expectations for the remainder of 2026. If that happens, it will almost certainly move the US Dollar by a meaningful amount.
If the data has the effect of weakening the US Dollar, it might have an especially dramatic effect in this currency pair, because the British Pound is a relatively strong currency, and is gaining against almost all other currencies. This could produce a bandwagon effect, with more and more traders deciding to get involved on the long side.
GBP/USD Technical Analysis
The US Dollar Index (DXY) made a new 13-month high last week but was ultimately held by the horizontal resistance level at 101.39. The price has sold off a little from this area but is basically consolidating not far below the resistance level. This suggests that 101.39 is likely to be a pivotal point and today could see either a final bullish breakout beyond it into blue sky, or a decisive reversal sending the price back down into its former consolidation zone.
Turning now to the GBP/USD, we can see an increasingly bullish picture which is supported technically by the double bottom (also a failed 2B breakdown) at the recent lows visible on a daily chart. Zooming into the hourly time frame, we see what looks to be a firm and impulsive bullish move higher from the low which has gained momentum over recent days. This is not the work of the US Dollar Index, although that has helped the rise a little, the Pound is showing real strength. Another bullish factor is the linear regression analysis study I placed in the chart below, which implies a symmetrical and orderly move with a good prospect of continuing.
At the time of writing, the price is making a strong bullish breakout beyond both the top of this price channel, and the resistance level at $1.3325, and these are very bullish signs. However, I would feel more bullish about that if it happened later after a weak US data release.
My Take on GBP/USD
When a currency pair looks like it is in a serious trend and then it plausibly turns around, it may generate a lot of exciting reversal momentum, and that is what seems to be happening here. Some kind of long trade looks attractive, and if the US data later today adds fuel to that, we could see an even stronger move higher. There are trend traders who will be especially excited by the bullish breakout we are seeing above the top of the price channel and beyond 1.3325.
Having said that, we still have not seen the US data, and that could chill the bullish sentiment if it is stronger than expected. Still, it’s a maxim in trading that “accidents happen along the line of least resistance”, which suggests that entering long now not far above $1.3325 using a wide stop loss could position you well for a data release giving the bullish move a tailwind.
Support & Resistance Levels
My previous GBP/USD signal on 30th June had me looking for a short trade below $1.3225, and I was correct to want to wait for signs this was a decisive bearish breakdown, as the price reversed just an hour after getting below that level.
Risk 0.75%.
Trades may only be entered prior to 5pm London time today.
Long Trade Ideas
Long entry following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.3325, $1.3264, or $1.3202.
Put the stop loss 1 pip below the local swing low.
Adjust the stop loss to break even once the trade is 25 pips in profit.
Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.
Short Trade Ideas
Short entry following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.3391, $1.3402, or $1.3489.
Put the stop loss 1 pip above the local swing high.
Adjust the stop loss to break even once the trade is 25 pips in profit.
Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to ride.
The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.
There is nothing of high importance scheduled today concerning the British Pound. Regarding the US Dollar, there will be releases of Average Hourly Earnings, the Non-Farm Employment Change, and the Unemployment Rate at 1:30pm London time.
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