The GBPUSD has bounced from its lows and is nearing a key resistance zone between 1.33607 and 1.3378. This area includes the 38.2% Fibonacci retracement level from the rise in April, located at 1.3375. Buyers are having difficulty breaking through this resistance, showing that sellers still have the upper hand. If the price goes above this range, the outlook could shift to neutral in the short term. Staying below this level keeps sellers in control, especially with the Federal Reserve meeting approaching.

GBP/USD Price Action

We are watching the GBP/USD pair pause just under the important 1.3375 level. This point is critical resistance, and while the price remains below it, we believe sellers are in charge. Today’s price movement shows a clear struggle at this technical ceiling. The main factor influencing our strategy is the Federal Reserve’s interest rate decision scheduled for tomorrow, July 30, 2025. Expectations are leaning towards a hawkish hold, which could strengthen the US dollar and push GBP/USD lower. The current market pause suggests that traders are positioning themselves ahead of this significant event. Recent economic data from the UK supports a weaker pound. Last week’s core inflation reading was 2.8%, slightly above the target, but not enough to prompt action from the Bank of England. A surprising 0.5% drop in June retail sales adds to the sense of a fragile UK economy, making it hard for the pound to make a strong rally. In contrast, the US Non-Farm Payroll report showed an addition of 215,000 jobs, indicating economic strength. This resilience gives the Federal Reserve more leeway to maintain a tough stance against inflation. This fundamental difference supports our bearish view on the GBP/USD pair.

Derivative Trading Opportunity

For those trading derivatives, we see a chance to buy near-term put options with a strike price below 1.3300. This strategy lets us profit from a possible downturn after the Fed announcement while limiting our loss to the premium paid. An expiration in August 2025 would capture the immediate market reaction and any follow-up movements. Historically, GBP/USD volatility can easily double on Fed announcement days, occasionally moving over 200 pips. We saw similar trends during the 2022-2023 rate hike cycle, where drops in price before central bank meetings often led to accelerated declines. We expect a similar pattern may emerge this week. If the pair unexpectedly breaks and closes above the 1.3378 resistance zone, our bearish outlook would be invalidated in the short term. This would indicate that buyers have absorbed the selling pressure. At that point, we would shift to a neutral stance and consider closing any short positions in derivatives. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now