Introduction
The latest rally of around 2% from the October low has taken GBP/USD to highs near 1.3375 on Wednesday as UK inflation data gets digested by the market. As a reminder, cable has defended the 1.3194 area September seven times this month .
Our earlier warning that sterling’s bounce looked like a possible bull trap has so far been tested rather than confirmed.
Key Support and Resistance Levels
First resistance is at the 100-day simple moving average of 1.3390, then 1.3400 to 1.3406 The primary near-term upside objective is at 1.3470 to 1.3474 (61.8% Fibonacci retracement, it aligns with regards both as the.250 extension and a swing high), with additional resistance proximate to the July/August highs of 1.3558 just above that region* On the flip side, support starts at 1.3365 (upper Bollinger Band), followed by 1.3302 and 1.3264, the October open. You are 1.3194 in critical support and the bulls’ line in the sand is the October low at 1.3135.
Indicators and Pattern
After the rebound Daily momentum has turned positive and price is riding up the upper Bollinger Band notably hinting at extensions in near-term. But the 100-day average remains a key hurdle and keeps the wider bias bearish. Investtech sees the pair trapped in a horizontal rectangle between 1.31 and 1.36, so a clear crossing either side should do away with uncertainty for potentially contributing to where price is next headed.
The speed of earlier losses, when GBP/USD fell to a six-week low on UK borrowing worries , shows how quickly this range can be tested.
Fundamental Drivers
Event risk is high. High UK inflation or labour market figures would bolster Bank of England tightening bets, while a downside surprise could re-ignite rate cut expectations. On the dollar side, Federal Reserve pricing remains pivotal, as explained in the Fed hiked but the dollar softened . Resilient UK labour data have supported sterling recently.
Trading Scenarios
Bullish scenario: a daily close above 1.3406 would target 1.3470, then 1.3558. Bearish scenario: a drop below 1.3264 would invalidate the breakout and expose 1.3194, while a close beneath that opens 1.3135 and 1.3092. For the wider picture, see GBP/USD’s resilient comeback .
Risk Management and Confirmation
Cable’s short term bounce has left Cable stretched already so chasing the move near resistance is a risk. So a pullback toward 1.3302 or 1.3264 that holds should be more supportive of demand, providing bulls with a lower-risk entry (stops beneath 1.3194). A daily close below 1.3264 would strengthen the argument against bears that this is just a view correction in the scope of the larger downtrend. As the pair is inside a large rectangle, patience is probably key: the first break usually fails and a retest of resistance is typically more reliable signal. Accompanying the chart, watch the US dollar index and Federal Reserve commentary since the pound tends to react to dollar moves as much if not more than domestic data.
The bottom line is that sterling tests restores but remains facing a congested band of resistance. Do not take a position until you see a close above 1.3406 or below 1.3264. The Bank of England and Federal Reserve are both data dependent, so expect fireworks out of each major release from here on out in the week ahead. Shorter term traders are advised to play small and respect stop changes at all costs.
The post GBP/USD: Cable Battles 1.3390 Resistance After UK Inflation Data appeared first in UK on InvestingCube .
