GBP/USD Outlook: Smart Money Analysis Points to Pullback

Technical Overview and Near-Term Correction

The GBP/USD pair recently posted a five-day winning streak, gaining 260 points after taking liquidity from the latest bearish swing and invalidating Imbalance 30. This price action established a bullish Order Block and bullish Imbalance 31, signaling a developing upward trend. However, the bullish momentum has encountered resistance at bearish Imbalance 29, triggering an anticipated corrective pullback. Technical factors suggest the pair could retrace toward the 1.3300 support level this week before attempting to resume the broader uptrend.

Fundamental Drivers and Monetary Policy Divergence

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Fundamental expectations continue to favor the British pound over the US dollar on a multi-month horizon. Market consensus anticipates up to three rate hikes from the Bank of England as UK inflation remains elevated. In contrast, Federal Reserve projections and FOMC minutes indicate a maximum of one or two rate hikes. Consequently, aggressive policy tightening by the Bank of England is expected to limit further US dollar upside once current safe-haven demand subsides.

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Geopolitical Influence and Market Sentiment

Recent dollar strength has been largely underpinned by safe-haven flows driven by Middle East geopolitical tensions. While these safe-haven dynamics have favored the greenback, analysts view the current downward pressure on GBP/USD as a technical correction rather than a structural bearish reversal. As geopolitical risks stabilize, underlying monetary policy divergences are expected to resume their primary influence on currency valuations.

Upcoming Economic Data

Market participants will monitor key US economic releases later in the session for potential volatility catalysts. The data schedule includes the Change in Durable Goods Orders at 12:30 UTC and New Home Sales figures at 14:00 UTC. These reports may influence short-term dollar sentiment during the North American trading session.

Trading Strategy and Forecast

The long-term outlook for GBP/USD remains bullish, supported by a liquidity sweep of previous lows that shifted market initiative back to buyers. Traders are advised to monitor the corrective pullback toward key support zones, such as the active Order Block and Imbalance 31, to identify favorable long entry points. The primary upside target for the current bullish cycle is located near the upper boundary of the established trading range at 1.3670.

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