Sterling Falters, Then Rebounds: Cable Volatility Returns as Structure Shifts

The British pound endured a volatile week against the US dollar, closing near 1.328 by Friday, May 16th, after a turbulent five-day stretch marked by failed breakouts, stop runs, and an eventual structural rebound. The pair’s behaviour reflected a shifting interplay between technical exhaustion, dollar resilience, and rebalanced interest rate expectations on both sides of the Atlantic.

The early part of the week was dominated by distribution within a well-defined descending triangle. After failing to breach the 1.3370–1.3400 ceiling the previous week, sterling came under selling pressure. A clean downward-sloping trendline defined price action through Tuesday and Wednesday, and by midweek, GBP/USD had broken decisively lower—triggering a cascade of stops below the key support zone at 1.3260, a level that had acted as a springboard during early May.

However, the breakdown proved short-lived. A sharp reversal on Thursday caught bears off guard as price reclaimed lost ground, cutting through the same trendline that had suppressed price earlier in the week. This kind of whipsaw action—trap, break, reclaim—is often indicative of either a fundamental re-rating or tactical repositioning. In this case, it likely reflected market recalibration following a weaker-than-expected US CPI release on Wednesday, which saw Treasury yields slide and the dollar weaken broadly across the board.

Sterling’s strength was further reinforced by domestic factors. Although Bank of England policymakers remained broadly cautious, commentary suggesting that policy easing may be delayed lent modest support to the pound. Furthermore, short-term rates traders began pricing out near-term cuts—adding fuel to the reversal that saw cable surge back above 1.3280 by week’s end.

Technically, the move was significant. The recovery off the 1.3170–1.3200 lows established a higher low relative to the late-April bottom, preserving the broader bullish structure visible on the higher timeframes. Price action also broke above the 200-hour moving average with conviction by Friday, a dynamic indicator that had previously acted as resistance since May 8th.

Still, risks remain. While the immediate downside may be contained for now, GBP/USD faces structural resistance near 1.3340, and momentum indicators appear to be flattening. Unless fresh macro data emerges to validate the shift in rate expectations, the pair may settle into a consolidation range between 1.3200–1.3350 in the sessions ahead.

For now, sterling’s resilience appears intact—but it may require further support, either in the form of soft US data or hawkish UK signals, to maintain altitude.