On September 30th, City Index analyst Fawad Razaqzada stated that although the overall trend of the US dollar remains bearish, the outlook for the pound against the US dollar is not so certain. As the exchange rate approaches the critical long-term resistance range of 1.35-1.40, the upward potential in the future may be limited.

Given that most of the factors contributing to the weakness of the US dollar have already been taken into account, the GBP/USD may experience a correction as this week's US employment data approaches.

The weekly chart shows that the GBP/USD is approaching overbought levels. When momentum indicators such as the Relative Strength Index (RSI) climb above the 70.0 level, it indicates the need for caution.

In the past few times, the weekly RSI has climbed above 70, but in the following months, we have seen a significant decline in GBP/USD.

On the daily chart, RSI is in a negative divergence state, forming a higher high point relative to the base price and forming a lower high point. This is an important sign of weakening bullish momentum.

Although momentum indicators indicate overbought conditions, what is missing so far is the most important bearish reversal signal. The GBP/USD has not yet formed a bearish price pattern to encourage short selling.

The current overbought situation should be seen as a warning to bulls, which may see some profit taking or short-term weakness. Bears need to remain patient until a clear reversal signal appears.

The key short-term support for the pound against the US dollar is around 1.3265, which was the high point in August. Below this level, 1.3200 is the next noteworthy support level, followed by the July 2023 high of 1.3142- a former resistance level that may now provide support during a pullback.

However, considering the overbought situation of RSI over a longer period of time, it is possible to see even greater declines from these levels before the GBP/USD becomes attractive again.