GBP/USD Price Forecast: Bias remains bullish ahead of BoE decision as key support holds

• Gains in GBP/USD keep the pair near 1.3490 as Thursday’s European session gets under way.
• Bullish RSI momentum supports the pair’s positive bias while it remains above the 100-day SMA.
• At 1.3505, the pair faces its nearest resistance, while initial support stands at 1.3390.

Gains in GBP/USD leave the pair trading around 1.3490 early in Thursday’s European session, as the US Dollar (USD) weakens against the British Pound (GBP). The move follows the Democrats’ takeover of the US Congress in the midterm elections.

Control of both the Senate and House of Representatives shifts from the Republicans to the Democrats, who secure majorities in each chamber. Tens of millions of voters deliver a sharp rebuke to President Donald Trump, handing the Democrats major victories in several Republican strongholds for the first time in decades.

Ray Attrill, head of FX strategy at National Australia Bank, linked the market reaction to the election outcome: "A lot of the market moves that we're seeing, particularly in bonds, I think can be traced directly to that, as well as a weaker dollar on the back of lower Treasury yields,"

Attention later on Thursday turns to the Bank of England (BoE) interest rate announcement. Economists surveyed by Reuters expect the UK central bank to lift Bank Rate from 3.75% to 4% at its November policy meeting, which would be its first increase since August 2023.

In addition to a rate increase this month, financial markets are pricing in at least three quarter-point hikes next year. That path would put UK interest rates above the levels projected for the US.

Can the Pound extend its Euro-led gains as the BoE decision approaches?

The Pound’s advance against the Dollar is closely tracking that of the single currency, according to Scotiabank strategists, who describe “the GBP … pacing the EUR’s gains versus the USD, rising around 0.4% intraday.” Recent activity figures provided little additional support, they observe, noting that “final UK Services and Composite PMI data for October were revised slightly lower to 52.8 and 52.9 respectively.” For Scotiabank, the focus is instead on monetary policy: “beyond the USD fallout from the mid-terms, GBP attention will quickly shift to tomorrow’s BoE policy decision,” with “a ¼ point hike is all but fully priced in at this point, with swaps anticipating a further 75bps of tightening from the BoE beyond tomorrow over the next year or so.”

Technical Outlook: Can GBP/USD sustain its bullish bias above the 100-day SMA?

A positive bias remains evident on the GBP/USD daily chart, with spot trading above both the 100-day Simple Moving Average (SMA) and the middle band of the 20-day Bollinger Bands. The pair is testing the upper half of its recent range, although the upper Bollinger band presents an immediate obstacle to further gains. At about 66, the Relative Strength Index (14) signals solid upward momentum, while also suggesting that the pair is approaching overbought territory.

The upper Bollinger band, around 1.3505, provides the first resistance on the upside. Should the pair close above it on a daily basis, the July 15 high of 1.3558 would come into view, followed by the August 25 high of 1.3655.  

The 100-day SMA at 1.3390 offers significant support on the downside, ahead of the middle Bollinger band near 1.3345. Losing these levels would undermine the bullish structure and bring the lower Bollinger band, close to 1.3185, into focus.

(The technical analysis of this story was written with the help of an AI tool. Know more.)