### GBP/USD Remains Steady GBP/USD held steady at the beginning of the week, trading above 1.3550. The currency pair stayed within a tight range as traders awaited key meetings from the Federal Reserve and the Bank of England. On Friday, the US Dollar received a boost from safe-haven buying amid growing geopolitical tensions between Israel and Iran. Although GBP/USD ended the previous week lower, it bounced back on Monday morning, trading around 1.3570. Technical analysis shows a weakening bullish trend, with GBP/USD staying near an ascending channel pattern and remaining above the nine-day Exponential Moving Average (EMA), suggesting short-term strength. The 14-day Relative Strength Index (RSI) is above 50, indicating a positive outlook. The Pound Sterling showed resilience against the Dollar, reaching a 39-month high above 1.3600. After a period of consolidation, GBP/USD gained momentum mid-week, peaking near 1.3635, its highest since February 2022. This trend highlights the exchange rate’s strength in recent weeks. ### Market Positioning and Central Bank Meetings At the week’s start, GBP/USD stabilized above 1.3550, with little desire to break out of its range as traders focused on central bank policy signals. Market positioning remained cautious due to the upcoming meetings of the Federal Reserve and the Bank of England. These events can quickly change market sentiment regarding interest rates and economic forecasts. On Friday, the US Dollar clearly gained traction, driven not by strong data but by a rush to safety following political tensions between Israel and Iran. In uncertain times, the Dollar usually attracts buyers, causing other currencies like Sterling to dip temporarily. However, despite the geopolitical concerns pushing the pair lower toward the weekend, the Pound began the week regaining lost ground at around 1.3570. From a technical perspective, traders should pay attention to chart patterns. GBP/USD is still trading above the nine-day EMA, a position that tends to favor upward movements. However, the upward momentum seems to be fading, indicating that buyers may be hesitant. This is evident in the RSI, which, while above 50 and maintaining a bullish signal, lacks aggression. Past price movements provide further context. The Pound previously rose past 1.3600, touching a peak it hadn’t seen since early 2021—specifically, February 2022. The increase to 1.3635 reflects a market eager to build on gains after breaking free from a prolonged holding pattern. This rebound followed a significant consolidation phase, where tighter trading bands were established before pushing higher. Given this backdrop, it’s crucial to monitor levels like 1.3550 and 1.3630 as near-term support and resistance. A close below the nine-day EMA, especially if accompanied by a weakening RSI, could lead to a drop toward the next support level around 1.3480. If resistance at 1.3635 is decisively broken, we could see the price move toward 1.3700. ### Risk Management and Geopolitical Impact For those managing derivative exposure, careful risk assessment at these inflection points is essential. The pound has strengthened partly due to more stable UK political conditions and milder inflation figures, but this stability may soon be tested depending on the Bank of England’s stance. Meanwhile, the Fed’s policy remains closely tied to inflation data and the resilient labor market. If the Fed expresses concern over persistent inflation, the Dollar may quickly recover lost ground. Volatility often spikes around interest rate decisions and forward guidance, so anticipating larger intraday fluctuations this week is sensible. Paying attention to implied volatility is wise, as it has been trending lower, suggesting that the market could be caught off-guard by any surprises from central banks. Options traders on GBP/USD might consider revisiting straddle or strangle strategies, especially given that prices are near multi-year highs. Geopolitical risks are again coming to the forefront of trading. Even short-lived flare-ups can lead to rapid gains in globally favored currencies and sudden downturns in high-yielding or politically sensitive currencies. Option premiums may be underestimating this geopolitical risk if markets are too focused on inflation alone. In summary, we stay patient but vigilant. Price levels are tight, the directional bias is softening, but the upcoming schedule of central bank meetings and geopolitical events offers numerous opportunities, as long as position sizing reflects the risks ahead. Create your live VT Markets account and start trading now.

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