GBP/USD is expected to trade within a range below 1.3380, according to analysts at UOB Group. After reaching a recent high of 1.3491, the pair’s momentum has slowed. For today, it is likely to fluctuate between 1.3420 and 1.3470. In the next one to three weeks, the GBP may trend up toward 1.3505. However, current momentum suggests it might struggle to break above this level. If it dips below 1.3380, this could indicate a shift from an upward trend to a more stable range.

Market Commentary

The FXStreet Insights Team provides expert observations and adds valuable insights. Their analysis combines commercial notes with contributions from both internal and external sources. GBP/USD has struggled to maintain its weekly gains, lingering around the 1.3400 mark even as the US Dollar weakens. This volatility demonstrates the complexities affecting currency movements. At the same time, other markets, such as gold and cryptocurrencies, are seeing significant shifts, with gold nearing $4,900 per troy ounce and Bitcoin staying below $90,000. Currently, the pound sterling shows a slight upward momentum, but there is strong resistance around 1.3505. As momentum fades, it appears any rally might lose steam. For traders, this suggests that the market may lack the energy for a sustained breakthrough in the coming weeks. Recent UK data shows that annual CPI inflation held steady at 4.0% in the final month of 2025. This persistent inflation supports the pound by pushing back on expectations of Bank of England rate cuts. However, global risk aversion is limiting any substantial gains. This creates a tug-of-war, making it hard to identify a clear trading direction right now.

Derivative Trading Strategies

For those trading derivatives, this environment suggests strategies that benefit from prices moving within a range and stable volatility. With key support at 1.3380, selling out-of-the-money strangles at strikes outside this expected range could be effective. In the fourth quarter of 2025, the pair remained in a tight 250-pip range, which may happen again. The weakness of the US dollar is the main factor keeping the pound elevated, though this is uncertain. Futures markets show a 97% probability that the US Federal Reserve will maintain rates in its January meeting, but attention is shifting towards geopolitical uncertainties. Tensions from the Davos forum are directing investors to safe havens like gold, now trading around $4,900 an ounce. Options market data supports a cautious outlook, showing that one-month risk reversals for GBP/USD have a small premium for call options over puts. This indicates that traders aren’t betting on a large upside movement and are hedging against a potential decline. Thus, purchasing protection below the 1.3380 support level seems wise for anyone holding long positions. Create your live VT Markets account and start trading now.

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