GBP/USD is currently above the nine-day EMA near 1.3450, with a chance to test the three-month high of 1.3534. The 14-day RSI reads 62.76, indicating strong momentum. Immediate support is at the nine-day EMA, located at 1.3468. On the first trading day of the year, GBP/USD was trading around 1.3470 during Asian hours. The pair is showing a weakening bullish trend, remaining slightly below the lower boundary of the ascending channel.

Short Term Trend

The nine-day EMA is above the 50-day EMA, indicating a positive short-term trend. If GBP/USD closes above 1.3534, it could move towards the six-month high of 1.3726, following the channel’s upper boundary at 1.3750. If there’s no rebound, the pair may consolidate. A drop below 1.3468 and 1.3362 EMAs would threaten progress in the short and medium term. Further declines could bring the pair close to the eight-month low of 1.3010. The British Pound is performing best against the Japanese Yen. The heat map shows percentage changes across currencies, with GBP fluctuating against other major currencies, such as USD (-0.01%) and EUR (0.00%). Reflecting on the bullish setup from early 2021, GBP/USD remained strong above key moving averages. On January 2, 2026, however, the situation is more complicated. The pair is trading around 1.2850, less influenced by pure trends and more by differing central bank policies. The optimism of that time has shifted to caution regarding the Bank of England’s future interest rate decisions.

Market Uncertainty

Today’s key issue is the uncertainty seen in derivatives pricing. Implied volatility for GBP/USD options has increased, with the Cboe British Pound Volatility Index (BPVIX) rising to 9.8, up from an average of 8.5 in late 2025. This indicates that the market expects larger price swings in the coming weeks. Traders expecting positive UK economic data could lead the Bank of England to stay hawkish. In this case, buying out-of-the-money call options provides a way to bet on a rally without taking on much risk. A move above the 1.3000 psychological level would be a good target for options expiring in February or March, allowing for potential gains while minimizing initial costs. On the other hand, with December 2025 UK inflation at a stubborn 2.8%, there’s a significant risk of downturn if the US Federal Reserve adopts a stricter policy. Traders predicting this could buy put options to profit from a drop back toward the 2025 lows around 1.2600. For those expecting a major move in either direction, a long straddle could capture a breakout. Remember, the strong momentum in early 2021 saw the pound rise above 1.42 by June. This highlights how a confirmed trend can be very profitable. However, today’s fundamental backdrop is largely different, driven by ongoing inflation rather than post-Brexit relief, so we should be ready for volatility in both directions. Create your live VT Markets account and start trading now.

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