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Although the last couple of weeks or so have seen relatively strong action in the GBP/USD currency pair things certainly got quieter towards the end of last week. It is possible, though, that action is going to heat up now and begin a process of reversals in what we have become used to when watching cable. As is usually the case, this is likely to be driven more by how markets view the US Dollar than the outlook for the British Pound. Will we see more of the same, a reversal, or consolidation?
Why the US Dollar Is Driving GBP/USD Lower
The main reason why now is a good time to be interested in the Forex market, and in this currency pair in particular, is that the US Dollar has recently made a significant technical breakout upwards. When the US Dollar is at the centre of market action, it often indicates a more reliable trend. In just the last few days and weeks, we have seen the Dollar become the currency that has serious strength, even as risk appetite remains somewhat strong. This comes after a long period of Dollar consolidation lasting well over one year, and breakouts that come after very long-term consolidation patterns are often powerful – although the technical breakout so far is in the DXY (US Dollar Index), not the GBP/USD.
Another reason why this seems to be an important moment for the US Dollar is the increasing expectation that the Federal Reserve will make two further rate hikes by the end of 2026, at about a 70% probability. The US 10-Year Treasury Yield is currently trading above 5.20% just below its nineteen-year high. Rising yields this high are likely to drive the Dollar higher.
Pivotal Point at 1.3274 May Sharpen Outcome
The price action has reached what might be a potentially defining moment: the descending price channel, evidenced by the linear regression analysis shown within the price chart below, is at risk of becoming invalidated by a break to the upside. This might bring what Jesse Livermore liked to call a “pivotal point”, with confluent horizontal resistance and an upper descending trend line which is currently placed at about 1.3274. At such pivotal points, what can happen is either a decisive bullish breakout which attracts long trades and might create a snowball effect, or sellers step in and hold the level, driving the price lower again. The level was tested during recent hours and so far it has held, with traders during the first half of today’s London session sending the price about fourteen pips lower – which is not very much, so I think this level remains in play.
Although I have been examining the long side, it is important to remember that technical factors and the trend are truly all quite bearish. The issue for bears is that the price is not far from multi-month lows, with the support at the round number at 1.3200 standing out, and there are other inflective lows below that. So, it might be somewhat dangerous trying to go short here. Then again, the trend could push the price through this supportive area.
GBP/USD H1 Price Chart
The Risk of Treating the Trend as Settled
Although I have been examining the long side, it is important to remember that technical factors and the trend are truly all quite bearish. The issue for bears is that the price is not far from multi-month lows, with the support at the round number at 1.3200 standing out, and there are other inflective lows below that.
So, it might be somewhat dangerous trying to go short here. Then again, the trend could push the price through this supportive area. The potential blind spot is to assume that either side has an easy path. A widely recognised dollar trend can encourage traders to overlook the difficulty of extending a move near established support, while a possible upside break can attract premature reversal calls.
What matters is whether price can find acceptance beyond the levels already in view. A brief move through resistance or support is less revealing than the ability of traders to hold that move and add to it.
What Could Change the Picture
The bearish reading would face a challenge if GBP/USD can break above the upper channel area and remain there with stronger participation. A meaningful retreat in Treasury yields, or a reduction in expectations for additional Federal Reserve tightening, could also weaken the dollar support that has shaped the recent backdrop.
Conversely, continued elevated yields and a firmer DXY would keep attention on whether the 1.3200 area can contain further pressure. These are conditions to monitor, not predictions. The current setup still allows for more than one outcome, which is precisely why the reaction around the key levels deserves attention.
The coming sessions should show whether the late-week quiet is simply a pause within the existing bearish structure or the start of a more meaningful change in behaviour. The response near 1.3274, and then around 1.3200 if the pair weakens, may reveal whether participation is building behind either view.
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