**GBP/USD Trades With Positive Bias Above 1.3300 Amid Softer USD; Upside Seems Limited**
*Original reporting by Haresh Menghani, FXStreet*
The GBP/USD currency pair maintained its modest upward trajectory in the early Asian session on Friday, trading just above the 1.3300 psychological mark. The move comes amid a broad-based softness in the US Dollar, but potential gains for the major seem capped as investors digest stronger US macroeconomic data and weigh shifting central bank outlooks. Below, we delve into the fundamental and technical drivers behind the GBP/USD price action, and analyze the possible near-term scenarios shaping the currency pair’s direction.
## US Dollar Eases After Strong Rally
In the past week, the US Dollar Index (DXY) surged to multi-month highs, buoyed by growing expectations that the Federal Reserve may taper its asset purchases sooner than initially anticipated. The rally was further fueled by robust domestic economic figures:
– US GDP growth in Q3 exceeded expectations
– Durable goods orders surged, defying market consensus
– Weekly initial jobless claims reflected continued improvement in the labor market
However, on Friday, the Greenback modestly retreated from its recent highs as bond yields paused their climb and investors booked profits towards month-end. This gave GBP/USD bulls a window to reclaim ground above the 1.3300 level.
## UK Fundamentals Remain Mixed
The British Pound’s reactions have been relatively muted given the lack of significant domestic economic releases in recent sessions. Earlier this week, the UK printed a somewhat mixed jobs report:
– Headline unemployment ticked lower
– Labor force participation rates edged up
– Wage growth moderated but remained well above pre-pandemic levels
Market focus remains on the Bank of England’s forthcoming interest rate decision. There is rising speculation that policymakers may pause on hikes amid uncertainty regarding the UK’s growth trajectory and persistent inflation concerns.
## Key Factors Driving GBP/USD Price Action
Several intertwined factors inform the outlook for GBP/USD:
1. **Fed Tapering Prospects**:
The Federal Reserve is widely expected to announce the start of policy normalization at its November meeting. Strong inflation readings and robust employment data bolster calls for reducing bond purchases, which would underpin the US Dollar.
2. **Bank of England Policy Path**:
Investor sentiment toward the Pound hinges on how soon the BoE might hike rates and how aggressively it could act. Dovish commentary from policymakers or signs of economic fragility could limit Sterling gains.
3. **COVID-19 Risks**:
Although the UK government has ruled out further lockdowns for now, rising daily case counts and hospitalizations present downside risks. Any indication that fresh restrictions may come into play could stifle GBP/USD upside.
4. **Brexit-Related Headlines**:
The ongoing trade spat between the UK and the EU over the Northern Ireland Protocol adds uncertainty. Abrupt or adverse developments in negotiations can lead to sentiment-driven moves in the Pound.
## Technical Analysis: Key Levels to Watch
GBP/USD staged a recovery from multi-week lows near 1.3260, but the bounce lacks conviction amid lingering bearish signals.
### On the Daily Chart:
– **Support Levels**:
– 1.3260: Recent multi-week low, initial line of defense for bulls
– 1.3200: Psychological support, and a possible trigger for extended declines
– **Resistance Levels**:
– 1.3340: Immediate upside barrier, corresponding to a horizontal pivot
– 1.3400: Round figure, previous area of supply and a necessary hurdle for sustained recovery
The pair remains under its 50-day and 200-day moving averages, signaling prevailing downward momentum. Short-term oscillators also suggest the potential for further losses if GBP/USD fails to consolidate above immediate support.
### Short-Term Bias
While some short covering and end-of-month position adjustments could drive the pair higher, the
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