GBP/USD traded slightly softer near 1.3440 in early European hours as the US Dollar firmed, with markets focused on whether President Donald Trump will approve a 60-day US-Iran Memorandum of Understanding cited by Axios. The US Dollar Index (DXY) was near 99.06, after easing from an over seven-week high of 99.10 on Thursday following reports that Washington and Tehran had reached an agreement. The MoU outlines unrestricted energy flows through the Strait of Hormuz, the removal of the US blockade on Iranian sea ports, and Tehran abandoning plans to build nuclear weapons.
In the UK, 10-year gilt yields were about 1% lower at around 4.81%, a near six-week low, adding pressure to Sterling as rate-hike expectations for the Bank of England eased. Technically, GBP/USD remained below the 20-day EMA at 1.3463, with RSI (14) holding in the 40.00–60.00 band. Resistance levels were cited at 1.3463 and 1.3505, while support sat near 1.3340 and 1.3300, within a broader consolidation between trend lines around 1.3340 and 1.3611.
GBP/USD Range Trading and Market Drivers
The GBP/USD pair is trading in a tight range around 1.2720 as the market digests mixed economic signals. We see the US Dollar’s recent strength acting as a cap on any significant upside for the pound. This sideways movement suggests that traders are waiting for a clearer catalyst before committing to a directional move.
The US Dollar Index is holding firm near 104.50, supported by recent data from the U.S. Census Bureau showing stronger-than-expected retail sales for April. This has reinforced the view that the Federal Reserve may be patient before considering any policy adjustments. However, the dollar’s momentum has slowed, preventing a sharp breakdown in the cable.
Meanwhile, we see pressure on the Pound from falling UK government bond yields, with the 10-year gilt yield easing to 4.15%. This follows the latest Office for National Statistics (ONS) report showing UK inflation fell to 2.1% in April, cooling expectations for a Bank of England rate hike this summer. This uncertainty about the BoE’s path is keeping sterling on the defensive.
Technical Outlook and Key Levels
From a technical standpoint, GBP/USD is struggling below its 20-day moving average around 1.2745, confirming a mildly bearish short-term bias. The pair is currently squeezed between a rising support line from the April lows and a descending resistance line from earlier this month. This tightening formation, or triangle, points to an imminent breakout.
The Relative Strength Index confirms this lack of direction, hovering just below the 50 mark, which signals that neither buyers nor sellers are in control. We believe this period of consolidation is building energy for the next significant price swing. Options traders should note that implied volatility may be low now but could spike once the range breaks.
For now, we are watching for resistance first at the 20-day average of 1.2745 and then the descending trendline near 1.2820. A decisive close above this level would suggest the sideways trend is resolving to the upside. This could trigger buy-stop orders and fuel a move higher.
On the downside, initial support lies at the rising trend line around 1.2650, followed by the psychological 1.2600 level. A break below this support structure would indicate that sellers have taken control. Such a move would likely accelerate the decline as protective stop-loss orders are triggered.
