The British pound remained close to a four-week low on Wednesday as traders waited for policy decisions from the Federal Reserve and Bank of England. GBP/USD traded around 1.3291, while higher oil prices and uncertainty over future rates kept currency markets cautious.
In this article, experts at Fonndure examine whether sterling can recover above 1.3350 or whether stronger US rate expectations could push the pair toward lower support.
Central Bank Expectations Pull in Different Directions
The Federal Reserve is expected to keep rates unchanged, but markets still see a possibility of further tightening if inflation remains elevated.
The Bank of England is also expected to hold its policy rate. Softer UK labor-market conditions may prevent policymakers from adopting a strongly hawkish tone.
The difference between US and UK rate expectations continues to favor the dollar.
A more hawkish Fed message could lift Treasury yields and place additional pressure on sterling.
The pound would receive support if the Fed sounds cautious or the Bank of England signals that inflation risks remain serious.
The Kagi Chart Shows a Weaker Trend
The first chart uses a Kagi format, which removes smaller price fluctuations and focuses on meaningful changes in direction.
The latest pattern shows a sequence of lower turns, reflecting the pound’s decline from its recent highs.
GBP/USD needs to recover above 1.3350 before the short-term trend begins to look more constructive.
A continued Kagi decline below 1.3250 would show that sellers remain in control. A reversal above 1.3350 could indicate that bearish pressure is fading.
Image 1: GBP/USD Kagi Trend Chart
Support Begins Near 1.3250
The first important support area sits around 1.3250. Holding above this level would leave the pair within its recent consolidation range.
A break below 1.3250 could expose 1.3200, followed by 1.3150 if the dollar strengthens.
A sustained move beneath 1.3200 would weaken the broader recovery structure and place sellers in firmer control.
Resistance Remains Near 1.3350
The first major barrier is positioned around 1.3350. A firm close above this level could expose 1.3400, followed by 1.3450.
A sustained move above 1.3400 would provide stronger evidence that sterling is moving out of its recent corrective phase.
Without that confirmation, rebounds may continue to attract selling as traders favor the dollar’s higher yield outlook.
The Awesome Oscillator Remains Negative
The second chart uses the Awesome Oscillator, which compares short-term and longer-term momentum.
Bars below zero indicate that shorter-term momentum is weaker than the broader trend.
The indicator remains negative, confirming that sellers still hold the immediate momentum advantage.
If the bars begin moving back towards zero, the decline may be losing strength.
A move above zero would support another attempt at 1.3350, while deeper negative readings would increase the risk of a fall towards 1.3250 or 1.3200.
Image 2: GBP/USD Four-Hour Chart With Awesome Oscillator
Oil Prices Add Inflation Pressure
Middle East tensions recently pushed oil prices higher, adding uncertainty to inflation and monetary policy.
Expensive energy can raise transport, manufacturing, and household costs in both the United States and the United Kingdom.
Higher oil prices may encourage central banks to keep rates restrictive for longer.
The effect may be stronger on the dollar if US policymakers are viewed as more willing to tighten again.
For the UK, higher energy costs increase inflation while also weakening consumer spending.
Sterling Positioning May Limit the Decline
Bearish positioning against the pound has started to ease. Net short sterling positions fell sharply from their June level.
Reduced bearish positioning may prevent an orderly decline from turning into a much sharper sell-off.
However, lighter positioning does not guarantee a recovery if the Fed remains hawkish and UK data continues to soften.
UK Economic Concerns Remain
The Bank of England must also consider weaker domestic activity. Soft labor-market data and concern about government spending have limited expectations of another immediate UK rate increase.
The pound may struggle to build a lasting recovery unless UK economic data improves or US yields begin to fall.
A stronger inflation report could revive expectations of tighter Bank of England policy, but officials may avoid adding pressure to a slowing economy.
Trading Implications
GBP/USD keeps a cautious short-term outlook while trading below 1.3350.
A confirmed break above 1.3350 could expose 1.3400 and 1.3450.
A move below 1.3250 would weaken immediate momentum, while a sustained break beneath 1.3200 could shift attention towards 1.3150.
A softer Fed message and improving UK data would support the upside case. Higher US yields and weak British economic figures would increase downside risk.
Conclusion
GBP/USD remains close to 1.3300 as investors wait for clearer guidance from the Federal Reserve and Bank of England.
Resistance is positioned near 1.3350, 1.3400, and 1.3450. Support can be found around 1.3250, 1.3200, and 1.3150.
The near-term technical picture still favors sellers, but reduced bearish positioning may limit the depth of any further decline.