GBP/USD is currently positioned at approximately 1.3490, having struggled to break through the 1.3530–1.3550 range. Nonetheless, the market continues to exhibit a clearly defined upward trajectory. The price is fluctuating between 1.3485 and 1.3490 following a peak in Asia around 1.3510 and a slight decline in Europe. Nevertheless, the pair continues to operate within a rising channel on the 2-hour chart and remains above all significant trend-defining moving averages. Provided that spot maintains the 1.34 handle, the prevailing sentiment leans towards upward movement rather than a significant pullback. On the daily chart, GBP/USD is positioned well above the 100-day EMA at 1.3336 and is trading above the Bollinger middle band at 1.3393. The 1.3393–1.3336 range has established itself as the key structural support level. The daily RSI is currently positioned around 66, having moderated from previous peaks while remaining solidly within bullish territory. The price action is positioned in the upper half of the Bollinger envelope, gradually approaching the upper band near 1.3547, marking the initial significant daily resistance cluster. On intraday timeframes, GBP/USD is steadily advancing within a well-defined rising channel on the 2-hour chart. Immediate support is positioned around 1.3470–1.3450, coinciding with the 50-period EMA and a short-term horizontal demand zone. Just below, the subsequent layer is 1.3428, followed by the wider range of 1.3410–1.3393, which is associated with the Bollinger middle line on the daily chart. Provided that dips remain above 1.3393, any pullbacks into the range of 1.3470–1.3450 and even 1.3428 should be viewed as chances to increase long positions, rather than indicators of a finished peak. The market is currently acknowledging 1.3534–1.3535 as the initial significant resistance level on the upside. This corresponds with the latest intraday peaks and the upper part of the Bollinger framework. Above that, 1.3561 and 1.3587 represent the subsequent resistance levels, succeeded by the psychological barrier at 1.3600 and the upper channel boundary within the 1.3600–1.3620 range. A decisive break through 1.3600 on solid volume would likely unlock the 1.3650–1.3700 zone as stops above recent highs are triggered and momentum accounts chase the move.
The recent trend in GBP/USD exemplifies a classic bullish consolidation. The pair exhibited a sudden surge from the 1.3340–1.3350 range, advancing toward 1.3530, subsequently entering a phase of lateral, muted price movement just beneath resistance. The observed structure suggests a potential pause prior to a subsequent upward movement, rather than indicating a peak formation, assuming that any pullbacks are modest and demand consistently resurfaces above 1.3390. The support level previously highlighted around 1.3348 has effectively served as the starting point for this movement. Since then, each corrective dip has established a higher low, and the most recent consolidation around 1.3470–1.3490 is taking place significantly above that foundational level. The significant gap between the current price and the initial breakout zone indicates that bullish sentiment continues to dominate the medium-term framework, provided that the level of 1.3336 is not decisively breached. The Bank of England has initiated a cautious approach to easing on the GBP side. The Monetary Policy Committee reduced the Bank Rate by 25 bps in December to 3.75%, marking the first decrease since last August. The guidance was explicit: policy will continue on a “gradual downward path,” and Governor Bailey emphasized that each subsequent cut becomes a “closer call.” This is significant for GBP/USD as it positions the BoE as an institution that is gradually normalizing rather than aggressively injecting cheap money into the system. Given that UK inflation remains elevated and wage dynamics have yet to stabilize, the Bank of England possesses the capacity to lower rates, although any adjustments will be gradual. This maintains a level of support for UK yields in contrast to a situation characterized by swift reductions, preventing the pound from being viewed solely as a funding currency. Historical evidence supports this assertion. In the 2008 easing cycle, following the initial cuts, GBP experienced a distinct and pronounced downtrend as policy adjustments penetrated several levels. The present landscape is significantly altered: inflation trends, labor market composition, and the Bank of England’s messaging all indicate a more gradual trajectory. The market’s comprehension is evident, as GBP/USD is currently positioned around 1.35 rather than reverting to 1.30.
The Federal Reserve has advanced significantly on the USD leg. The rates were reduced three times in 2025, amounting to a total of 75 basis points, which adjusted the federal funds range to 3.50–3.75. Current market expectations indicate the likelihood of at least two additional cuts in 2026, with futures suggesting an approximate 18.3% chance of a further adjustment during the January meeting. The November core PCE print at approximately 2.4%, marking the lowest level in over two years, provides the Federal Reserve with a rationale to consider further easing while maintaining its credibility. Despite that, the US Dollar Index is holding around 98.00 in thin year-end liquidity. On a short-term chart, DXY is constrained by the 50-period EMA near 98.12 and the 100-period EMA around 98.55–98.60. The price is currently confined within a gentle ascending channel, situated within a larger downtrend framework. This indicates a currency that has relinquished its previous bullish momentum, yet has not fully transitioned into a definitive decline. The current environment clearly supports currency pairs where the foreign central bank is adopting a more measured approach to easing compared to the Fed, which is precisely the situation for GBP/USD. As the Fed’s easing cycle progresses, the rate differentials that previously provided significant support for the USD are narrowing.
The compression is steady yet significant, supporting GBP/USD’s position above 1.34, even amid occasional surges in dollar demand prompted by risk-off sentiments or unexpected data releases. Each instance of renewed USD demand has led the pair to find support significantly above 1.3390, indicating that the structural sellers of GBP do not dominate this market. Safe-haven flows serve as the primary counterbalance to the optimistic narrative surrounding GBP/USD. Uncertainty surrounding Ukraine peace discussions, broader geopolitical tensions, and trade-war rhetoric typically lead to intermittent demand for the USD. These flows have resulted in intraday dips beneath 1.3500 and have elevated implied volatility in GBP/USD options to three-month peaks. However, the actual spot pattern indicates the resilience of the pound. Candles positioned near support zones—specifically around 1.3470–1.3450 and 1.3428—exhibit long lower wicks and smaller real bodies, indicating that sellers are struggling to maintain dominance. Every decline into those regions has attracted buying interest instead of continued selling pressure. The observed behavior aligns with a market scenario where the demand for USD, influenced by geopolitical factors, is perceived as a liquidity event for increasing long positions in GBP/USD, rather than serving as a trigger for a trend reversal.
The technical framework surrounding GBP/USD supports a positive outlook. On the daily chart, the 100-day EMA at 1.3336 serves as the primary bullish indicator, whereas the Bollinger middle band near 1.3393 establishes the initial structural support level. Trading above that band and the EMA cluster indicates a confirmation of an upward medium-term bias. The RSI at approximately 66 on the daily timeframe indicates robust momentum that has not yet reached exhaustion. The indicator has shifted from the overbought territory but has yet to revert to a neutral position. This behavior is characteristic of a market that is trending within a consolidation phase, rather than one that is gearing up for a complete reversal. Bollinger bands are showing a modest widening, which supports the strength of the trend rather than indicating random spikes that are solely a result of low liquidity. On the 2-hour chart, the price is navigating within a rising channel, with support levels established around 1.3470 and 1.3428, while resistance is emerging near 1.3535 and 1.3600. The 50-period EMA positioned around 1.3470 and the 100-period EMA situated near 1.3340 provide support for the movement. Fibonacci retracement structures from prior swings indicate that the current position is situated in the upper half of the recent range, reinforcing the notion that bullish sentiment continues to dominate the trading landscape. From a trading perspective, the signals from price, policy, and flows are consistent. As GBP/USD remains above 1.3393, particularly above 1.3336, the current risk-reward dynamics suggest that long positions on managed pullbacks are more advantageous than initiating new short positions during upward movements. The 1.3470–1.3450 and 1.3428 levels present opportunities for re-entry or additional positions for current longs, aiming for a retest of 1.3535, followed by 1.3561 and 1.3587. There is also a potential extension scenario towards 1.3600–1.3650 if momentum picks up after the holiday period and liquidity returns to normal. A consistent daily close beneath 1.3336 would be necessary to suggest that the medium-term framework has been disrupted and that a more significant correction towards 1.3250–1.3200 is in progress. The existing data, along with central-bank trajectories and the technical profile, do not substantiate that as the primary scenario. With the current spot near 1.3490, the Bank of England’s cautious easing from 3.75%, and the Federal Reserve positioned at 3.50–3.75 with further cuts anticipated, the DXY is stalling around 98.00. Meanwhile, GBP/USD is maintaining a rising channel. Therefore, the pair is optimally categorized as a Buy on dips above 1.3390, with 1.3336 serving as structural invalidation and a bullish outlook towards the 1.36 region.