GBP/USD boosted by strong data, but further gains are required to confirm a positive breakout

GBP/USD extended gains on Friday following stronger-than-expected UK PMI data, supported by a weaker dollar. The pair’s fresh momentum broke above the daily Kijun-sen (1.2414) and approached the next key resistance at 1.2455 (50% retracement of the 1.2811–1.2099 decline), though upside progress began to face headwinds near this level.

The risk of a recovery stalling emerges from an overbought stochastic oscillator and 14-day momentum still in negative territory. However, bullish bias is likely to persist as long as the price holds above the 20-day moving average (1.2354), which has transitioned from a key resistance to a supportive level.

On the weekly chart, the outlook appears more optimistic with the formation of a potential reversal pattern, keeping hopes alive for further recovery. A weekly close above the broken Fibonacci resistance at 1.2371 (38.2% retracement of 1.2811–1.2099) would be the minimum requirement to sustain bullish momentum. Further validation would require a break above 1.2455 (50% retracement) and 1.2500 (a psychological barrier and 10-week moving average).

Fundamental factors could limit the pound’s gains. The Bank of England is expected to cut rates next month, and elevated inflation combined with soft labor market data may further weigh on the outlook, tempering the strength of the recovery.

Res: 1.2455; 1.2500; 1.2539; 1.2557
Sup: 1.2371; 1.2354; 1.2280; 1.2229