Throughout Thursday, the GBP/USD currency pair shot up for a second consecutive day. It came up off of its recent bottoms, a sign of positive momentum. The GBP/USD has bounced back from its lowest point since the beginning of August, likely stabilizing around the 1.3250-1.3245 area. Market experts are closely monitoring the positive trend. They’re particularly interested in the pair as it approaches key Fibonacci retracement levels that could determine its future path.
As of now, GBP/USD has moved upwards towards the 50% Fibonacci retracement level after breaking beyond the 38.2% retracement of a recent pullback from the 1.3725 region. This positive momentum has caused the two to reach a high not experienced in more than two months. Other analysts are cautioning that once GBP/USD is able to convincingly break below the 1.3300 level it could trigger additional downward movement. If so, this dive could speed up its return toward the 1.3250-1.3245 zone.
The current recovery has been supported in the area around the 1.3355 zone, which is where the 23.6% Fibonacci retracement level of the last bearish impulse lies. For now, traders will need to focus on any bearish correction through the 1.3400 key psychological support. This might form an excellent purchasing opportunity to take advantage of positive gains in GBP/USD.
Traders will be keenly focused on the psychological round number at 1.3500 as support. If the price is able to hold a breakout above this level, it might create bullish momentum. If this momentum continues, we could see GBP/USD spot prices approaching 1.3545-1.3550 range. Widely seen as the next target for the pair over the short-to-medium-term, the 1.3480-1.3485 region does seem a likely candidate.
Other economic factors are impacting the movements on the GBP/USD pair. Specifically, risks from a potential US government shutdown and a re-escalation of US-China trade tensions are proving to be central factors. These uncertainties are positive for the future strength of USD, which lends further support to GBP/USD bullish momentum.
External pressures are only part of the story. US domestic economic indicators have a huge impact on market sentiment but so do UK domestic economic indicators. In newly released employment numbers, growth in regular pay has fallen to its slowest rate since 2022. At the same time, the International Labour Organization (ILO) announced a surprise increase in the unemployment rate to 4.8% for the three months to August. As these developments eventually lead the Bank of England to lean towards gradual rate cuts, the mix is likely to weigh on GBP/USD even more.
UK industrial production surprised with a beat, increasing 0.4% in August. This jump comes after a 0.4% decrease the month before. This jump reverses a bit of recent bad economic news. The move would likely bolster appreciation of the British pound relative to the US dollar.
This combination of economic factors have continued to leave GBP/USD traders in a climate of uncertainty. The duo can continue to flourish and make bigger advances by maintaining the momentum, staying above important support. They need the courage to face fierce external economic headwinds to thrive.