This article is a follow up to the GBP/USD article posted on July 15, titled GBP/USD Vulnerable as Trendline Break Sets Up Potential 600 Pip Drop
GBPUSD has continued its recovery having dipped below a long term ascending trendline discussed in the July 15 article. Not a complete surprise given that the pair was in oversold territory on the daily chart and I did mention the possibility of a pullback.
It Begs the Question, What Has Changed for the British Pound?
The pullback which took place following the highs printed on July 1 were largely driven by developments in the UK, with fiscal concerns coming to the fore and renewed dovishness from the Bank of England.
This week’s UK data has strengthened the case for fewer rate cuts, thanks to stronger-than-expected inflation (CPI) and solid labor market numbers.
However, this was not enough to alter rate cut expectations ahead of the next Bank of England (BoE) meeting on August 7. Markets are still expecting almost one full 25 basis point rate cut and a total of nearly 50 basis points of easing by December, based on LSEG data.
Implied BoE Rate Cuts Through December 2025
Technical Analysis – GBP/USD
GBP/USD has tested the descending trendline on the four-hour chart and so far it has failed to break above the trendline.
A break of the trendline could lead to an extended rally to the upside with potential targets and resistance around 1.3585 which is also where the 100-day MA rests.
Should such a move occur it would not necessarily invalidate the bearish long-term setup on the daily discussed in the July 15 article.
GBP/USD Four-Hour Chart, July 18, 2025
The Daily chart below as you can see is also showing the trendline retest and immediate resistance at 1.3500.
A deeper retracement toward the 1.36570 may still be a possibility based on the daily timeframe with only a daily candle close above this level invalidating the long-term bearish setup discussed in GBP/USD Vulnerable as Trendline Break Sets Up Potential 600 Pip Drop, written on July 15.
A pullback to this level could provide market participants with a better risk-to-reward opportunity.
GBP/USD Daily Chart, July 18, 2025
Support
- 1.3438
- 1.3380
- 1.3250
Resistance
- 1.3500
- 1.3657
- 1.3788
Client Sentiment Data – GBP/USD
Looking at OANDA client sentiment data and market participants are MIXED on the GBPUSD with just 52% of traders net-short. I prefer to take a contrarian view toward crowd sentiment and usually prefer atleast a 60/40 split between Net Long and Short. This is just a sign of the indecision and concern around GBP/USD. Will we see a deeper pullback before the next leg lower or is this the next leg higher to print fresh highs? This question is no doubt weighing on the minds of market participants.
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About the Author
Zain Vawda
Market Analyst
Zain is an experienced financial markets analyst and educator with a rich tapestry of experience in the world of retail forex, economics, and market analysis. Initially starting out in a sales and business development role, his passion for economics and technical analysis propelled him towards a career as an analyst.
He has spent the last 3 years in an analyst role honing his skills across various financial domains, including technical analysis, economic data interpretation, price action strategies, and analyzing the geopolitical impacts on global markets. Currently, Zain is advancing in obtaining his Capital Markets & Security Analyst (CMSA) designation through the Corporate Finance Institute (CFI), where he has completed modules in fixed income fundamentals, portfolio management fundamentals, equity market fundamentals, introduction to capital markets, and derivative fundamentals.
He is also a regular guest on radio and television programs in South Africa, providing insight into global markets and the economy. Additionally, he has contributed to the development of a financial markets course approved by BankSeta (Banking Sector Education and Training Authority) at NQF level 6 in South Africa.
Zain is an experienced financial markets analyst and educator with a rich tapestry of experience in the world of retail forex, economics, and market analysis. Initially starting out in a sales and business development role, his passion for economics and technical analysis propelled him towards a career as an analyst.
He has spent the last 3 years in an analyst role honing his skills across various financial domains, including technical analysis, economic data interpretation, price action strategies, and analyzing the geopolitical impacts on global markets. Currently, Zain is advancing in obtaining his Capital Markets & Security Analyst (CMSA) designation through the Corporate Finance Institute (CFI), where he has completed modules in fixed income fundamentals, portfolio management fundamentals, equity market fundamentals, introduction to capital markets, and derivative fundamentals.
He is also a regular guest on radio and television programs in South Africa, providing insight into global markets and the economy. Additionally, he has contributed to the development of a financial markets course approved by BankSeta (Banking Sector Education and Training Authority) at NQF level 6 in South Africa.
