The GBP may soon test the 1.3355 level, while support at 1.3315 seems less likely for now. The long-term outlook for the GBP remains negative, with potential drops to 1.3355 and possibly 1.3315. In the last 24 hours, the GBP fell sharply to a low of 1.3364, departing from the expected trading range of 1.3410 to 1.3460. Although this drop was unexpected, GBP might still test the 1.3355 support level. The resistance points are now 1.3400 and 1.3415 for any upward movements.

Shift In GBP Narrative

In the next one to three weeks, the GBP outlook has changed after it broke below 1.3390, ending a brief period of range trading between 1.3390 and 1.3520. With increasing downward momentum, GBP is expected to move towards 1.3355 and maybe reach 1.3315. However, if it breaks above the strong resistance at 1.3445, this negative outlook could be challenged. Reflecting on our analysis from January 2025, we noted a quick rise in downward momentum for the pound after it broke a crucial support level. That negative outlook seems relevant again today, as the GBP struggles to maintain gains above 1.3400. The conditions that triggered that view are appearing once more. Given the possibility of a drop, traders might consider buying GBP/USD put options with strike prices near 1.3350, targeting similar levels as last year. This bearish perspective is supported by the latest UK inflation data for December 2025, which, at 2.8%, reduced pressure on the Bank of England. This is in contrast to the cautious stance of the US Federal Reserve, leading to a clear policy divide favoring the dollar.

Economic Factors Supporting Bearish Outlook

The UK’s economic weakness was underscored by the final Q4 2025 GDP figures, showing near-stagnation. This contrasts sharply with last week’s resilient US jobs market. This situation supports a stronger dollar against a weaker pound, a trend we observed during volatile periods in 2024. Therefore, adopting bearish positions seems wise for the upcoming weeks. For those who prefer a more conservative strategy, a bear call spread might be effective. One could sell call options with a strike price at or slightly above the 1.3445 ‘strong resistance’ level we noted in 2025. This strategy allows for profit from a sideways or downward drift in the pound, while also clearly defining risk if the currency unexpectedly strengthens. Create your live VT Markets account and start trading now.

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