(MENAFN- Daily Forex)

• GBP/USD stalled after an attempted continuation higher, with UK budget optimism clashing against looming rate cuts and a potentially stronger US outlook.
• A pullback remains plausible as markets await next week's Fed decision and Powell's press conference.

The British pound has gone back and forth during the trading session on Thursday, abruptly stopping after trying to continue the upward trajectory. There has been some celebration of the UK budget and how great it's going to be for the United Kingdom, but let us not forget, they are getting really close to cutting rates, and sooner or later, I think that overwhelms this short-term euphoria.

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The other side of the equation, which of course is on the other side of the Atlantic Ocean, is the Federal Reserve, and they are anticipated to cut rates next Wednesday. However, the real question is going to be what they are going to say in the press conference? Jerome Powell has a long history of messing these things up and confusing traders, so that ought to be fun for all involved.

US Outlook and Key Levels

The reality is that the United States economy is likely to pick up in the first quarter of 2026. And if that's the case, it makes more sense for the US dollar to go higher than lower as other economies around the world are set to be a little soft, including the United Kingdom. A pullback from here makes a certain amount of sense and could send the British pound back down to the 1.32 level. That's an area I'd expect to see a certain amount of support, as it had been supported in the past and resistance even more recently.

EURUSD Chart by TradingView

Anything below there, then I think you get a continuation of significant selling. On the other hand, if we can break above the 1.34 level, then we may continue to the 1.36 level. It has been a long time spent here in this what looked like a topping pattern, but right now we are trying to challenge that. If we give up the candlestick from Wednesday, that is a very strong sign that this pair drops.

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