GBP/USD near 1.35 as dollar strength caps breakout

What matters economically is the relative policy and growth backdrop behind the cross. The US dollar index was firmer at 99.75, with technical readings still showing a market near the lower end of its recent range but not in breakdown territory. At the same time, Adalytica’s US dollar trade signals point to “Extreme Greed,” with sentiment at 100, while sterling’s own signal is only neutral. That divergence suggests investors remain more convinced by the dollar’s carry and safe-haven appeal than by any near-term case for the pound.

That dynamic is reinforced by volatility. Adalytica’s FX volatility reading is at 93, also flagged as “Extreme Greed,” indicating traders are paying up for protection even as spot FX has been relatively quiet. In practice, that usually means breakouts need a stronger catalyst than modest positioning changes: a softer US inflation or labor print, a clearer shift in Federal Reserve expectations, or an unexpectedly hawkish turn from the Bank of England would be more likely to shake GBP/USD out of its range.

For investors, the key question is less whether sterling can edge higher than whether it can sustain a move above 1.35 without the dollar regaining the upper hand. A confirmed break would matter for UK import pricing, foreign earnings translation, and broader risk sentiment across G10 FX. A failed attempt would leave cable vulnerable to a retracement toward the 1.34 area where both major moving averages converge, and potentially lower if dollar demand intensifies.

The immediate setup is therefore a classic standoff: sterling is not weak enough to break down, but the dollar is still strong enough to cap the upside. Until one side gets a macro catalyst, GBP/USD looks more like a range trade than the start of a trend.