FXStreet reports—On Wednesday in Asian trading, the British pound surged against the U.S. dollar as strong buying interest pushed the pair above the middle of the 1.34 level, reaching its highest level since September 16. Early vote counts from the U.S. midterm elections increased expectations of a Democratic victory, prompting safe-haven demand for U.S. Treasuries and pressuring the dollar; expectations of diplomatic reconciliation between the U.S. and Iran reduced geopolitical risk appetite, while market participants also anticipated a rate hike by the Bank of England on Thursday. These combined factors bolstered the pound, as markets await the Bank of England’s policy decision and U.S. non-farm payrolls data.
According to Huitong Finance APP — During the Asian trading session on Wednesday, the British pound against the US dollar saw strong buying pressure, pushing the exchange rate higher and stabilizing above 1.34, reaching its highest level since September 16. The US dollar index declined to its lowest level in over a month, as preliminary election results for the US midterm elections suggested an increased likelihood of Democratic victories, leading markets to anticipate policy gridlock in Washington. This prompted investors to flock to US Treasuries as a safe haven, causing Treasury yields to fall and directly weighing on the US dollar’s performance.
In addition, expectations of progress in U.S.-Iran diplomatic negotiations have reduced the dollar’s appeal as a safe-haven asset, further supporting the GBP/USD pair. Trump’s public statements indicating that the U.S. has no immediate plans to strike Iran have led markets to price in a decline in geopolitical risk premiums. The pound’s own fundamentals have also been supported, as the latest UK fiscal budget has eased market concerns about the country’s fiscal position, while expectations for a rate hike by the Bank of England at its Thursday meeting continue to rise.
The U.S. Department of Labor released JOLTS job openings data showing that job openings rose from 7.2 million to 7.5 million in September, with hiring remaining robust. Rising energy prices also pose inflationary risks, theoretically supporting further policy tightening by the Federal Reserve. However, the data did not significantly boost the U.S. dollar, suggesting limited short-term upward resistance for the British pound against the dollar.
As the North American trading session begins, the market will focus on the U.S. ADP private employment data and the ISM services PMI, with the true core event of the week being the Bank of England’s interest rate decision on Thursday and the Friday non-farm payrolls report. The overall fundamental environment remains bullish, with market sentiment favoring buying dips in the pound, suggesting that any pullbacks are likely to attract strong buying interest.
On the daily timeframe, the GBP/USD has shifted to a short-term bullish structure, with price breaking above the 200-day simple moving average at 1.3424 during the session and currently holding slightly above the 61.8% Fibonacci retracement at 1.3467, reclaiming the mid-section of the prior downtrend as buyers defend this key hub level. Immediate resistance lies at the 78.6% Fibonacci retracement at 1.3556, the first major barrier, with further upside targeting the recent cycle high at 1.3670. Immediate support is found at the 200-day MA at 1.3424 and the 50.0% Fibonacci retracement at 1.3404; deeper support levels are at the 38.2% retracement at 1.3341, the 23.6% retracement at 1.3264, and the key structural support at 1.3138.
On the 4-hour chart, the moving average system shows a bullish alignment, with prices continuing to rise and indicators remaining in a neutral-to-strong zone without entering severely overbought territory. As long as the price holds above 1.3424, the short-term bullish structure remains intact; if it breaks below this level effectively, the current breakout is invalidated, and price action will likely return to consolidation. Next, await the Bank of England’s decision, as the market will likely follow fundamental developments to determine its next direction.
Editor's Summary
Multiple factors are converging to drive a strong rally in GBP/USD, as the dollar faces pressure from expectations surrounding the midterm elections and declining U.S. Treasury yields, while rising expectations of a Bank of England rate hike further propel the pair above key moving average resistance. However, be cautious of the Bank of England delivering a dovish signal, which could trigger a pullback as traders sell the news after buying the expectation. Additionally, if U.S. employment data significantly exceeds expectations, it could spark a dollar rebound and weigh on the pound. Key focus remains on the 1.3424 breakout threshold, as event-driven volatility is expected to expand.
In addition, expectations of progress in U.S.-Iran diplomatic negotiations have reduced the dollar’s appeal as a safe-haven asset, further supporting the GBP/USD pair. Trump’s public statements indicating that the U.S. has no immediate plans to strike Iran have led markets to price in a decline in geopolitical risk premiums. The pound’s own fundamentals have also been supported, as the latest UK fiscal budget has eased market concerns about the country’s fiscal position, while expectations for a rate hike by the Bank of England at its Thursday meeting continue to rise.
The U.S. Department of Labor released JOLTS job openings data showing that job openings rose from 7.2 million to 7.5 million in September, with hiring remaining robust. Rising energy prices also pose inflationary risks, theoretically supporting further policy tightening by the Federal Reserve. However, the data did not significantly boost the U.S. dollar, suggesting limited short-term upward resistance for the British pound against the dollar.
As the North American trading session begins, the market will focus on the U.S. ADP private employment data and the ISM services PMI, with the true core event of the week being the Bank of England’s interest rate decision on Thursday and the Friday non-farm payrolls report. The overall fundamental environment remains bullish, with market sentiment favoring buying dips in the pound, suggesting that any pullbacks are likely to attract strong buying interest.
On the daily timeframe, the GBP/USD has shifted to a short-term bullish structure, with price breaking above the 200-day simple moving average at 1.3424 during the session and currently holding slightly above the 61.8% Fibonacci retracement at 1.3467, reclaiming the mid-section of the prior downtrend as buyers defend this key hub level. Immediate resistance lies at the 78.6% Fibonacci retracement at 1.3556, the first major barrier, with further upside targeting the recent cycle high at 1.3670. Immediate support is found at the 200-day MA at 1.3424 and the 50.0% Fibonacci retracement at 1.3404; deeper support levels are at the 38.2% retracement at 1.3341, the 23.6% retracement at 1.3264, and the key structural support at 1.3138.
On the 4-hour chart, the moving average system shows a bullish alignment, with prices continuing to rise and indicators remaining in a neutral-to-strong zone without entering severely overbought territory. As long as the price holds above 1.3424, the short-term bullish structure remains intact; if it breaks below this level effectively, the current breakout is invalidated, and price action will likely return to consolidation. Next, await the Bank of England’s decision, as the market will likely follow fundamental developments to determine its next direction.
Editor's Summary
Multiple factors are converging to drive a strong rally in GBP/USD, as the dollar faces pressure from expectations surrounding the midterm elections and declining U.S. Treasury yields, while rising expectations of a Bank of England rate hike further propel the pair above key moving average resistance. However, be cautious of the Bank of England delivering a dovish signal, which could trigger a pullback as traders sell the news after buying the expectation. Additionally, if U.S. employment data significantly exceeds expectations, it could spark a dollar rebound and weigh on the pound. Key focus remains on the 1.3424 breakout threshold, as event-driven volatility is expected to expand.