- GBP/USD is at a crossroads on the charts as traders get set for the BoE.
- A rebound in USD would be the foundation for a considerable bear continuation in cable.
At 1.3440, GBP/USD is firm in Asia but is facing a wall of technical resistance in the build-up to the Bank of England this Thursday. There are hawkish expectations that have been priced into sterling but the improving trend in net GBP positions has come to an abrupt halt, as analysts at Rabobank explained in a note on Tuesday.
''Improving trend in net GBP positions has come to an abrupt halt with net shorts rising last week despite expectations of a February rate hike from the BoE. The money market has been positioned for a fair amount of tightening this year,'' the analysts elaborated. ''That said, fears of a spike in the cost of living in the UK questions whether the BoE be able to match these expectations.''
Nevertheless, the spot market could come unstuck, in tune with positioning ahead of the remaining sessions leading up to the meeting, especially if the US dollar can catch a corrective bid. The US dollar fell around 70 pips on Monday, as investors consolidated gains ahead of the closely-watched monthly Nonfarm Payrolls report this Friday, taking a pause after a furious rally that took the currency to a 1-1/2-year high on Friday. Technically, the index, however, looks poised for a downside extension on the hourly chart as follows:
In such a scenario, the pound will benefit, but there are unlikely to be any fast moves this week before the critical events on both sides of the pond.
The Old Lady meets Thursday. Reuters said in a note on Monday that most economists polled by the news agency expect the BoE to raise rates to 0.5% on Feb. 3 from 0.25%. ''Reaching the 0.5% threshold would also see the bank stop reinvesting maturing gilts and start to reduce its 875 billion-pound government bond holdings.''
''Some reckon the BoE will be even more hawkish than anticipated; Goldman Sachs predicts interest rates at 1% in May and 1.25% in November to show 'the MPC (Monetary Policy Committee) is serious about the inflation target, and will act to ensure the UK does not face the risk of a wage-price spiral.'''
GBP/USD technical analysis
The daily chart shows an imbalance of price to the downside that is yet to be mitigated. A rebound in the greenback would see to that. The bulls have also reached a critical layer of resistance which is being tested. The bears will be prudent to monitor price developments from a lower time frame for bearish structure:
The 4-hour structure is bullish, however, and a break of 1.3450 would likely seal the deal for a run on stops around the psychological 1.35 round level.
1.3525 could be tested at a stretch as the last defence for a significant reversal of the current bearish trend. If, on the other hand, the bears beat down the doors, the dynamic support would come under pressure and a break of there would expose 1.3350 and lower towards 1.3240.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks

EUR/USD advances to multi-day highs around 1.0860
EUR/USD is surging ahead, rapidly recovering and approaching multi-day highs around 1.0860. This boost comes on the heels of news that the EU might roll out countermeasures to soften the blow of Trump’s impending reciprocal tariffs.

GBP/USD flirts with tops near 1.2970 ahead of Trump's tariffs
GBP/USD is accelerating, challenging weekly highs near 1.2970 as a renewed, sharp drop in the Greenback sets the stage for the US 'reciprocal tariffs' announcement on "Liberation Day" at 20:00 GMT.

Gold looks consolidative near $3,120 ahead of Trump's “Liberation Day”
Gold is regaining momentum, climbing above $3,120 after a slight pullback from Tuesday’s near-record high of $3,150. Retreating US yields are bolstering XAU/USD, ahead of President Trump's official announcement of the reciprocal tariff measures later this Wednesday.

Trump Tariffs: Everything you need to know on “Liberation Day” Premium
The global trading system is about to be upended, but to what extent? Will markets have clarity or is it merely another phase in ongoing trade wars? Some answers are due on Wednesday at 20:00 GMT. Here is preview of the five critical things to watch.

Is the US economy headed for a recession?
Leading economists say a recession is more likely than originally expected. With new tariffs set to be launched on April 2, investors and economists are growing more concerned about an economic slowdown or recession.

The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.