• GBP/USD attracts some dip-buyers following a bearish gap down to a one-week low on Monday.
• Fading Fed rate hike bets counter US-Iran tensions and undermine the USD, supporting the pair.
• The mixed technical setup warrants some caution before positioning for any further appreciation.

The GBP/USD pair builds on its modest intraday recovery from a one-week low and climbs back above the 1.3500 psychological mark during the early European session on Monday. Spot prices have now filled the weekly bearish gap and seem poised to appreciate further amid the emergence of fresh US Dollar (USD) selling.

Despite renewed US-Iran tensions over the Strait of Hormuz, the safe-haven USD struggles to capitalize on its early gains to a one-week high amid diminishing odds for a rate hike by the US Federal Reserve (Fed). This marks a significant divergence in comparison to the Bank of England's (BoE) outlook, which might continue to act as a tailwind for the British Pound (GBP) and validates the positive outlook for the GBP/USD pair.

From a technical perspective, the recent breakout through the 200-period Simple Moving Average (SMA) on the 4-hour chart was seen as a key trigger for bulls. The subsequent move up, however, stalled near the 61.8% Fibonacci retracement level of the January-March fall , around the 1.3600 mark, or over a two-month high set on Friday, and warrants some caution before positioning for any further appreciating move for the GBP/USD pair.

Meanwhile, momentum signals are mixed, with the Relative Strength Index (RSI) hovering near a neutral 48 and the Moving Average Convergence Divergence (MACD) indicator remaining slightly negative. This hints that upside traction is still tentative and backs the case for a move back towards the 1.3600 neighborhood, or the 61.8% Fibo. retracement level. This is followed by a more significant barrier at the 78.6% level near 1.3716.

Some follow-through buying beyond the recent cycle high zone around the 1.3868 area will reaffirm the near-term positive outlook and pave the way for additional gains. On the downside, immediate support is located at the 50% retracement level at 1.3512, with further cushions seen at the 38.2% Fibo. retracement at 1.3428 and the 200-period SMA at 1.3364. A deeper slide would expose the 23.6% retracement at 1.3324 ahead of the structural low around 1.3156.

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

GBP/USD 4-hour chart