GBP/USD has not changed for two days, trading around 1.3460 during Wednesday’s Asian session. The daily chart shows a decrease in bullish sentiment as the pair slips below the lower line of its upward channel. The nine-day Exponential Moving Average (EMA) is above the 50-day EMA, suggesting a still bullish outlook. The pair hovers just below the short-term average but stays well above the medium-term average, indicating ongoing support for the trend. The 14-day Relative Strength Index (RSI) is at 61.0, showing a positive stance without signs of overbuying.

Rebounding Above Nine-Day EMA

If GBP/USD rebounds above the nine-day EMA of 1.3462, it could aim for the three-month high of 1.3534 set on December 24. A close above 1.3534 may allow the pair to reach the upper boundary of the ascending channel near 1.3690. If it falls below the short-term average and the channel, the 50-day EMA at 1.3351 would be the first significant support level, which could diminish upward momentum. A further drop might push GBP/USD toward the eight-month low of 1.3010. Recent data shows the British Pound is weakest against the US Dollar today, reflecting various percentage changes among major currencies. Akhtar Faruqui, a Forex Analyst, is recognized for his detailed market insights from New Delhi.

Critical Point Around 1.3460

The GBP/USD pair sits at a crucial point around 1.3460, having dipped just below its recent upward channel. While moving averages support the underlying trend, this pullback signals caution. Traders should prepare for potential movements in either direction as 2026 begins. Those anticipating a rebound might consider buying call options with a strike price above the three-month high of 1.3534. The positive RSI reading of 61.0 indicates potential for upward movement without the market being overbought. This bullish perspective is backed by the latest UK inflation data from November 2025, showing a persistent 3.8%, which kept the Bank of England’s stance hawkish in its last meeting. Conversely, the current weakness could escalate, especially since the pound was the weakest performer against the dollar today. A drop below the 50-day EMA at 1.3351 would send a strong bearish signal; traders could use put options to benefit from a possible decline towards the 1.30 level. This serves as a reminder of the steep drops in 2022, highlighting how quickly sentiment on the pound can change. This fundamental divergence is crucial, as the latest US core PCE inflation reading fell to 3.0%, leading many to believe that the Federal Reserve might cut rates by mid-2026. In this uncertain environment, using options spreads is a smart way to manage risk while positioning for either an upward break due to persistent UK inflation or a downward move if US economic strength prevails. Employment and inflation reports from both countries in the coming weeks will likely trigger the next significant market movement. Create your live VT Markets account and start trading now.

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