Pound-to-Dollar Rate Climbs the Fib Ladder

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The pound retreats from recent highs against the dollar, but the trend still favours further upside.

The pound to dollar exchange rate (GBP/USD) retreats to 1.3496 from new four-month highs set at 1.3567 on Tuesday.

Looking at the daily chart suggests weakness should be relatively shallow as the pair has entered a relatively predictable pattern since it started to recover from its early-November low at 1.3010.

We've drawn a fibonacci retracement sequence over the existing short-term rally, from the low near 1.3010 to the early-January high near 1.3567, capturing the full impulsive leg higher.

What stands out is how price has respected each retracement level sequentially, rather than slicing through them:

• The 61.8% retracement (~1.3220) held cleanly in late November, forming the base for the next leg higher
• The 50% area (~1.3290) acted as a consolidation shelf, with multiple daily closes holding above it before continuation.
• The 38.2% retracement (~1.3354) became support in mid-December after the breakout, again confirming acceptance.
• Most recently, the 23.6% retracement (~1.3436) has been repeatedly tested from above and defended.

This behaviour is characteristic of a strong, orderly trend, where pullbacks are shallow and buyers consistently step in at progressively higher Fibonacci levels.

Instead of one deep retracement, the market is using Fib levels as stepping stones higher, hence the ladder analogy.

In trending markets:

• Shallow retracements (23.6%–38.2%) usually signal strong underlying demand.
• Price holding above 23.6% suggests the market is in trend continuation mode, not correction mode.
• The rising dashed trendline reinforces this by intersecting the same Fibonacci zones, creating confluence support.

The repeated defence of each level tells us rallies are being absorbed, not rejected.

1) Immediate outlook (coming hours)

Bias: Mildly constructive to neutral, not bearish

• Price is currently hovering just above the 23.6% retracement (~1.3435).
• As long as daily and intraday price action remains above 1.3420–1.3430, dips are likely to attract buyers.
• Short-term softness should be viewed as consolidation within trend, not reversal.

What would weaken the immediate outlook:

• A decisive intraday break below 1.3430, especially if accompanied by a trendline break, would open a drift toward 1.3350 (38.2%).

For now, the ladder remains intact.

2) Short-term outlook (coming days)

Bias: Bullish continuation while above 1.3350

The Fibonacci ladder structure suggests:

• Buyers are willing to defend higher and higher prices.
• The market is digesting gains, not distributing them.

Key implications:

• Holding above 1.3430 keeps pressure on the 1.3550–1.3570 highs.
• A daily close above the recent highs would invalidate the retracement structure entirely and confirm trend extension, not exhaustion.
• Only a sustained break below the 38.2% level (~1.3350) would signal that the ladder is breaking and a deeper correction is unfolding.

Important: We have some U.S. data out later (U.S. ISM Services PMI and JOLTS job opening) today which could upset the analysis if it comes in well above expectations.

Then there's the all-important non-farm payroll report due Friday that will tell us how the domestic labour market is performing. Again, any strength here would boost the dollar and potentially wreck the technical uptrend we're seeing in pound-dollar.