On Wednesday during the Asian session, the pound struggled to extend its gains against the dollar on the basis of the modest rise in the Asian session, remaining above 1.3350 but still holding above the one-and-a-half-week low reached the previous day. The pullback after the previous swing high of 1.3506 has brought the exchange rate down by about 95 pips from around 1.3445 yesterday. The dollar maintained its gains from the previous day, driven by strong US inflation data, as markets bet on a possible 50-basis-point rate hike by the Federal Reserve in December. US CPI data showed that the overall CPI rose 0.4% month-over-month in October, higher than the expected 0.3%; the core CPI, excluding food and energy, rose 0.3% , unchanged from September and exceeding the expected 0.2%. Meanwhile, the US Bureau of Labor Statistics omitted October's annual data due to last year's government shutdown. According to the CME FedWatch tool, the market is currently pricing in a 91% probability of a December rate hike. Nevertheless, hopes for US-Iran diplomacy limited the upside for the safe-haven dollar. US President Trump hinted that further military strikes against Iran might no longer be necessary, and Secretary of State Marco Rubio stated at the G7 summit that large-scale military action was unnecessary. Furthermore, hawkish interest rate expectations from the Bank of England provided a tailwind for the pound against the dollar – the Bank of England had previously raised interest rates by 25 basis points to 4.00%, its first rate hike in over three years, and warned that at least one more rate hike would be needed if the Middle East conflict continued. From a technical perspective, the GBP/USD pair held above the 200-period simple moving average (1.3314) on the 4-hour chart, maintaining a mildly bullish recent tone above multiple Fibonacci retracement levels, suggesting that underlying demand remains after the pullback from the 1.3506 swing high. However, momentum indicators remain weak, offering caution for the bulls: the Relative Strength Index (RSI) is near 38 , and the Moving Average Convergence Divergence (MACD) is slightly negative and trending flat, suggesting a lack of strong buyer confidence and potentially slow upward progress. Initial resistance lies at the 38.2% Fibonacci retracement (1.3365) , followed by the 23.6% retracement (1.3419) , while the 1.3506 swing high remains a key bullish target. Immediate support lies at the 50.0% Fibonacci retracement level (1.3322) , followed by the 200-period simple moving average (1.3314) . A break below these two levels would expose deeper Fibonacci support at 1.3279 and 1.3217 , while 1.3138 forms a more distant structural bottom. On the daily chart, the price has fallen below the previously marked 100-day simple moving average at 1.3400 —a level that turned from resistance to support yesterday, but was breached again today. This indicates that the bullish signal of "breaking above the 100-day moving average" has been disproven, and the short-term tone has weakened again. The current price is between 1.3314 and 1.3400, forming a narrow "moving average sandwich". The direction needs to be confirmed by a breakout: if it recovers above 1.3400, it will return to a bullish structure; if it breaks below 1.3314, it will open up downside potential to 1.3279 and 1.3217. Editor's Summary: The core contradiction in the GBP/USD exchange rate is the hedging between the strong dollar (due to the possibility of a 50 basis point rate hike by the Federal Reserve) and the pound's support based on the Bank of England's hawkish stance. The former is more aggressively priced in after the CPI data, thus dominating the short term. 1.3314 (4-hour 200-period moving average) is the current watershed between bulls and bears, while 1.3400 (100-day moving average) is the threshold for the bulls to regain control. In the medium term, if the Fed implements a 50 basis point rate hike, the probability of the exchange rate falling below 1.3314 and testing 1.3279 and 1.3217 increases. If the Bank of England raises rates again in December, or if progress in US-Iran diplomacy weakens the safe-haven demand for the dollar, the pound is expected to hold 1.3314 and retest 1.3365-1.3419. Key attention should be paid to the extent of the Fed's December rate hike (25 or 50 basis points), the Bank of England's statements before its December meeting and the transmission of oil prices to UK inflation, as well as the progress of US-Iran negotiations.