Can strong U.S. dollar demand pressure GBP/USD?

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Pound Sterling vs Dollar drops 0.72%

Highlights

The US dollar retained its strength against major currencies as traders anticipated a Federal Reserve interest rate increase.
Expectations of higher US rates have increased dollar demand and widened the yield differential, putting additional pressure on GBP/USD.
GBP/USD trades below key moving averages and technical indicators confirm strong selling pressure, with price expected to range between $1.3313 and $1.3447 and a high probability of further declines.

Dollar demand rises as Fed rate hike expectations spur pressure

The U.S. dollar recently maintained its strength against major currencies, including Pound Sterling, as market participants looked ahead to an anticipated interest rate hike from the Federal Reserve, according to Economictimes Indiatimes. The expectation of higher U.S. rates has supported dollar demand, which typically weighs on GBP/USD by widening the yield differential. With traders positioning for this potential policy shift, Pound Sterling has experienced additional downward pressure in the forex market.

Persistent bearish momentum as moving averages and signals align

On the hourly chart, GBP/USD trades below the 20- and 50-period moving averages, while on the daily timeframe it remains under the 200-day moving average. The Ichimoku Kijun sits at 1.3438, establishing immediate resistance. Momentum indicators confirm persistent bearishness: both the MACD and ADX signal a continued sell bias, while RSI, Stochastic RSI, and CCI are in oversold territory. Bull/Bear Power reflects intraday seller dominance, and the Awesome Oscillator aligns with the prevailing downtrend.

Range-bound outlook with risk of further pound declines on breakdown

In the short term, GBP/USD is expected to fluctuate within a range between 1.3313 and 1.3447, based on typical volatility. The probability of further declines remains high, with upward movement viewed as unlikely unless a break above resistance at 1.3438 occurs. The baseline scenario favors sideways movement within this band, but a drop below 1.3313 could trigger additional losses.

Viktoras Karapetjanc, expert at Traders Union, sees GBP/USD shaped by a firm U.S. dollar and clear bearish market sentiment. He notes that both macroeconomic expectations and technical indicators reinforce the downward outlook for Pound Sterling. With yields supporting the greenback, Karapetjanc believes any recovery attempts face strong resistance. He expects limited upside unless the pair breaks decisively above 1.3438. "With the Federal Reserve’s policy shift in focus and persistent risk-off attitude, I remain confident that GBP/USD will stay under pressure in the near term."

Earlier, analysts noted that persistent technical selling and weak momentum continued to weigh on GBP/USD keeping the pair under pressure. The latest analysis further reinforces this negative outlook, with traders advised to monitor the 1.3313 support level as a potential trigger for renewed downside risk.

Source of Data: GBP Price Analysis by TU

The analysis is based on a proprietary model combining technical, on-chain, and expert data. Not investment advice. See methodology

The information is based on forecasts and does not constitute investment advice or a guarantee of future results. Market conditions may change. See our Disclaimer and Editorial Integrity for details.