The Pound Sterling (GBP) is consolidating after a recent climb to a multi-year peak, trading near the upper 1.37 levels. This week’s gains are attributed to UK-US yield spreads turning positive, with data showing slightly contractionary manufacturing and minor expansion in services.

Upcoming Week Overview

In the upcoming week, focus shifts to the final Q1 GDP release and broader market developments, particularly with the ECB’s central banking forum. The RSI stands at 66, suggesting room for further increases, as it is below the overbought threshold of 70. Potential negative divergence raises some concerns, but the outlook remains positive with attention on the 50-day moving average of 1.3438 as support. Major resistance lies at the 1.40 level, with the short-term range envisaged between 1.3600 support and 1.3800 resistance. What we’ve seen so far is a stabilisation in Sterling after its strong upward move, hesitating just below resistance as traders digest last week’s drivers. The reference to UK-US yield spreads flipping into positive territory essentially means gilts are now yielding more than their US Treasury counterparts. That shift tends to support the Pound, as yield-seeking flows favour British assets, particularly when coupled with a modest expansion in UK services. The contraction in manufacturing is a concern, albeit a familiar one, and is unlikely to surprise anyone at this point. As we review the coming sessions, attention naturally swings towards the final reading of Q1 GDP. Any noteworthy revision—up or down—could offer clearer direction primarily for short-term positioning. However, revisions at this stage in the release cycle rarely spark lasting moves, unless dramatically out of line with prior estimates. We should also be alert to positioning around the ECB’s forum, where policymakers may inject volatility indirectly into the Pound, depending on how firm their messaging sounds on rates and inflation targets. Markets tend to reprice quickly after any perceived shift in tone.

Relative Strength Index Insights

The Relative Strength Index, mentioned here being at 66, implies the rally isn’t overextended. RSI is one of those tools we use to check whether prices have risen too quickly. An RSI below 70 tells us that there might still be appetite for further gains before entering overly stretched conditions. However, the mention of potential negative divergence — where price makes new highs but the index does not — raises a red flag for momentum traders. If that persists in the days ahead, it might flag exhaustion in the uptrend before it becomes obvious in price. With that in mind, we would look at the 50-day moving average, sitting around 1.3438, as a support that’s held firm multiple times this year. We often find it effective as a mid-term pivot that reflects broader consensus without being too sluggish. If prices retreat, how they behave near that line usually offers a clearer signal than intraday noise. Most attention, however, is likely to hover around the short-term band of 1.3600 to 1.3800. These levels have played the role of battle lines—where buyers and sellers repeatedly re-engage. If that top end gives way and closes are sustained above 1.3800, a move to test the 1.40 level could unfold faster than expected. Reinforcement from firm economic numbers or hawkish commentary from BoE officials would only accelerate that path. In contrast, a dip back below 1.3600—while not a reversal in and of itself—would suggest the pullback has more to run. If RSI simultaneously turns lower and momentum weakens, those clues usually compound and trigger broader unwinds. Until then, the longer GBP trades near the top of its recent range without retracing meaningfully, the firmer the floor becomes beneath it.

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