The British pound is clawing its way back against the greenback, with trading at approximately $1.3490 during Friday’s European session after a violent reversal from early-session lows. The pair has turned decisively positive on the day despite spending most of the week grinding lower in response to stalled U.S.-Iran peace talks, elevated , and the broader dollar rally that carried the steadily higher from last week’s lows. The DXY is now off 0.1% at $98.70, breaking a three-day winning streak and providing the immediate tactical catalyst for the Cable rebound. Current pricing across the major platforms shows GBP/USD at $1.35194 per the real-time Forex quote, with a market sentiment reading of 74.9% bullish on the retail positioning side — a notable skew that either reflects genuine conviction or, depending on how you read contrarian indicators, a crowd that is about to get squeezed.
The intraday move carries structural significance because it confirms buying interest at the 20-day Exponential Moving Average near $1.3449, which has been one of the cleanest dynamic support levels on the daily chart for the last several weeks. That successful defense of the EMA — combined with the bullish morning star pattern that formed earlier on the intraday chart — turns the short-term technical read from ambiguous to outright constructive. The tape is now positioned directly between two critical zones: the $1.3165-$1.3450 support architecture below and the $1.3870-$1.4300 Elliott Wave target zone above. The next set of macro catalysts — Federal Reserve and Bank of England decisions due next week, plus whatever emerges from the Islamabad peace talks — will almost certainly define which way this resolves. Position sizing in this environment requires unusual discipline, because the event risk lined up across the next seven sessions is some of the highest-weighted of the quarter.
Three distinct catalysts converged to drive Friday’s recovery in GBP/USD, and each one deserves careful attention because the mix tells you something about what the market is actually pricing and what it is not. The UK Retail Sales data for March landed at +0.7% month-on-month, blowing past the +0.2% consensus expectation and delivering exactly the kind of upside surprise that forces an immediate repricing across the pound complex. The prior February print was simultaneously revised lower from -0.4% to -0.6%, which adds a meaningful layer of nuance — the March beat comes off a softer base, and much of the strength in the data was reportedly driven by higher fuel purchases as petrol prices climbed on the Iran-driven energy shock rather than genuine discretionary consumer strength.
Scotiabank’s Shaun Osborne and Eric Theoret framed the composition directly in their Friday note: the retail strength largely reflects fuel purchases as prices rose in response to the Middle East conflict, which means the headline beat somewhat overstates the underlying demand picture. Even so, the market read the print as pound-positive and Cable traded higher accordingly, because in the current environment any UK data that is not outright weak becomes a reason to cover dollar longs. The secondary data release that came out Friday — the Bank of England’s Decision Maker Panel survey — painted a relatively soft picture for UK growth ahead, but it showed inflation expectations continuing to nudge higher toward 4%, the highest reading since late 2023. For currency markets, sticky inflation at elevated rates means the BoE has cover to maintain its hawkish posture even as the growth picture softens — and that keeps the interest rate differential supportive of the pound.
The second major driver was the long-overdue correction in the U.S. dollar. DXY rallied for three consecutive sessions into Friday, pressing toward the $98.88 zone before running into exhausted buying pressure. The profit-taking on the greenback was telegraphed by the positioning data — speculative short-dollar positions had been materially reduced into the rally, leaving the trade crowded on the long side and vulnerable to a mean reversion. The absence of material U.S. data releases Friday created an ideal setup for position squaring ahead of next week’s Fed decision, and every dollar-short trader who had been stopped out over the prior three sessions was suddenly looking at a level worth re-engaging. The broader dollar outlook remains structurally firm because oil prices continue to sit at elevated levels amid ongoing fears of a prolonged Strait of Hormuz closure — the Strait carries nearly 20% of global energy supply — but the immediate correction provided the room Cable needed to stage its recovery.
The third driver was the Iran story itself, which has become the dominant macro narrative across every risk-sensitive currency pair. Reports that Iranian Foreign Minister Abbas Araghchi would fly to Islamabad for a second round of U.S.-Iran talks injected a meaningful dose of diplomatic optimism that partially unwound the safe-haven dollar bid that had been accumulating all week. The context makes this especially volatile: President Trump has publicly ordered the U.S. Navy to “shoot and kill” any boat laying mines in the Strait; Iran has set the complete removal of the U.S. naval blockade as a strict precondition for resuming any negotiations; and the Israel-Lebanon ceasefire was extended for three additional weeks during a White House meeting this week. The combination of hawkish rhetoric and tentative diplomacy has produced exactly the kind of whipsaw environment that has defined Cable trading for the past month, with the pair oscillating between $1.3400 and $1.3600 on nothing more than headline flow.
The Elliott Wave structural count on GBP/USD is one of the cleanest setups across the entire G10 pair spectrum, and it provides both an actionable trading framework and a clear invalidation level. On the weekly timeframe, an ascending wave of larger degree labeled (A) of B is developing as part of a multi-month bullish structure. Within that ascending wave, wave 1 of (A) has already completed, a downward correction formed wave 2 of (A), and the third wave 3 of (A) appears to be actively unfolding on the daily chart, with wave iii of 3 currently developing as its subsidiary leg.
On the H4 timeframe, the third wave of smaller degree (iii) of iii has presumably started forming, and within that structure wave i of (iii) has already printed while the local correction wave ii of (iii) is currently developing. If the wave count is accurate — and the technical confluence at the moving averages and Fibonacci levels strongly supports that interpretation — then GBP/USD should continue rising toward the $1.3870-$1.4300 target zone once the current corrective phase resolves. That range represents a move of roughly 3.0% to 6.0% from current levels over a medium-term horizon, which is a genuinely substantial move by major-pair standards and would require a multi-week runway to complete.
The critical invalidation level for the entire bullish structural count is $1.3165. A confirmed breakout and consolidation below that pivot would invalidate the entire wave structure and open the door to a deeper decline toward the $1.2936-$1.2736 zone. The trade management framework flows directly from the wave structure and offers clearly defined risk parameters. Long positions on pullbacks to the $1.3165-$1.3450 zone offer favorable risk-reward profiles, with stops placed below $1.3125 and primary targets at $1.3870, with extended targets at $1.4300. The alternative scenario — tactical short positions on a confirmed break and close below $1.3165 — targets $1.2936-$1.2736 with stops placed above $1.3205. Current price at $1.35194 leaves Cable sitting just above the first critical support cluster, giving disciplined traders a well-defined risk window for position accumulation without having to chase strength at overhead resistance.
The near-term technical picture reinforces the longer-cycle Elliott Wave count in ways that matter for tactical positioning. GBP/USD is holding above the 20-day EMA at $1.3449 and above the 38.2% Fibonacci retracement at $1.3432 of the $1.3161-$1.3870 swing leg. That confluence at the retracement level and the moving average creates a natural pivot that the market has respected multiple times during the recent consolidation. The 14-day Relative Strength Index is reading at 55.2, sitting comfortably above the neutral 50 line — this signals that bullish momentum remains in place while leaving meaningful room for further upside before overbought conditions activate above the 70 threshold. The Bollinger Bands on the daily chart are widening, confirming rising volatility, and price action is holding above the middle band, which is historically a structural bullish signal.
The resistance architecture stacks cleanly above current price. Immediate overhead sits at the 50% Fibonacci retracement at $1.3515, followed by the 61.8% level at $1.3599. Further resistance hurdles cluster at $1.3718 and $1.3870. Scotiabank’s intraday technical framework flagged the bullish “morning star” candlestick pattern that formed on the intraday chart earlier in the Friday session, and the bank’s directional conclusion is neutral-to-bullish: gains through $1.3495-$1.3500 may extend to $1.3555, with support defined at $1.3450-$1.3460. Scotiabank notes that the pound has formed a base via the morning star pattern and that upside momentum is developing after the pause in the dollar rally.
Initial support on the downside sits at the 20-day EMA at $1.3449, followed by the 38.2% retracement at $1.3432. A deeper pullback would expose the 23.6% Fibonacci level at $1.3328 and then the $1.3161 swing low — the exact level that aligns with the Elliott Wave structural invalidation zone. That convergence between the Fibonacci framework, the wave count, and the moving average cluster is what makes the current setup technically clean enough for institutional flow desks to trade with conviction.
The fundamental backdrop underpinning the bullish Cable thesis is the interest rate and policy divergence between the Bank of England and the Federal Reserve, and that divergence is meaningful enough to drive the pair even when technical factors and headline flow turn against it temporarily. The BoE is maintaining a hawkish stance, with Governor Andrew Bailey consistently signaling caution on rate cuts even as the broader UK growth picture shows signs of softening. UK inflation remains above the 2% target, forcing the BoE to keep rates at elevated levels that provide a meaningful interest rate differential against Fed policy.
Friday’s BoE Decision Maker Panel survey pointed to a relatively soft picture for growth ahead, but the inflation expectations component continues nudging higher — approaching 4%, which is the highest reading since late 2023. That combination means the BoE’s policy task is genuinely harder than the Fed’s right now, but it also means rates stay higher for longer in the UK, which structurally supports the pound through the carry channel and through the policy credibility channel. Currency markets reward central bank consistency, and the BoE is delivering consistency even in the face of softer economic data.
Both the Fed and the BoE meet next week, with the Fed decision scheduled for April 29. Both central banks are broadly expected to hold rates unchanged at the current meeting, which means the market reaction will be driven entirely by statement language, dot plot revisions, and press conference tone from both Chair Powell and Governor Bailey. A hawkish Fed outcome — emphasis on sticky inflation from the Iran-driven energy shock, language suggesting delayed cut timing, concerns about Hormuz-driven supply disruption — would strengthen the dollar and push GBP/USD back toward the $1.3432 support cluster and potentially deeper toward $1.3328. A dovish Fed shift — any hint of earlier rate cuts than the market currently prices, acknowledgment of softening labor data, dovish language around the 49.8 University of Michigan consumer sentiment print — would compress the dollar and send Cable ripping through $1.3495 toward $1.3555 and potentially $1.3599 within a single session.
The interest rate differential currently favors the pound, and there is a secondary policy-credibility element that amplifies the signal. The Department of Justice has just closed its criminal probe of Fed Chair Powell, clearing the procedural way for Kevin Warsh’s confirmation as the next Fed chair. That adds uncertainty about the forward U.S. policy path because Warsh is perceived by markets as modestly more dovish than Powell, and any transition period introduces additional volatility into dollar pricing. For Cable specifically, Fed uncertainty is a tailwind, because the pound benefits from a clean BoE story contrasting with a messier Fed story.
That’s TradingNEWS.com
