GBP/USD edged higher for a second day and traded around 1.3450 in the first half of the European session on Wednesday, up less than 0.10%. Price action was supported by softer demand for the US Dollar after optimism over a diplomatic outcome in the five-month Middle East war and the reopening of the Strait of Hormuz pushed crude to a four-week low, easing inflation concerns. In parallel, market pricing for an imminent Fed rate rise was pared back, reducing support for the dollar.
Positioning remained cautious as attention stayed on developments in the US-Iran conflict and Friday’s US Nonfarm Payrolls (NFP) report for guidance on the Fed policy path. Technically, the pair held a constructive tone while above the 200-hour SMA, with the RSI near 55 and MACD marginally positive around the zero line. Support was framed around 1.3400 and the 200-period SMA near 1.3379, while resistance was referenced at the weekly high near the 1.3500 level.
Technical And Derivatives Trading Outlook
We suggest derivative traders look for buying opportunities in GBP/USD as the pair maintains its bullish momentum just above 1.3450. With the exchange rate holding steady above the key 200-period Simple Moving Average (SMA) of 1.3379, the technical outlook remains highly supportive for buyers. Entering long call options or bull call spreads could be an effective way to capture further upside toward the 1.3500 psychological barrier.
Macroeconomic Context And Risk Management
Our bullish outlook is supported by recent macroeconomic shifts, including easing global energy prices with Brent crude dropping to a multi-week low of around $76 a barrel. Additionally, with the UK’s inflation rate steadying near 2.2% and the US Federal Reserve projected to trim interest rates further this quarter, the yield spread favors the Pound. Historically, similar interest rate trends have driven the GBP/USD pair up by an average of 3% in the weeks following such policy shifts.
To manage risks ahead of the upcoming US Nonfarm Payrolls release, we advise setting tight stop-losses or purchasing protective put options just below the 1.3379 support level. A confirmed break below this pivotal average would invalidate our short-term bullish thesis and likely open the door to deeper losses. Until then, momentum indicators like the RSI hovering near 55 suggest steady upward pressure that we should exploit in the coming weeks.
