The GBP/USD pair has reached a new high of 1.35558, its highest point since August 18, exceeding Friday’s peak of 1.35541. Buyers tried to push the price up but have lost some momentum, leading to a pullback. Right now, support is found at the 61.8% retracement level from the September 11 high, which is at 1.35397. This level is crucial for traders; staying above it leans towards a bullish outlook, while falling below could signal a failed breakout.

A Balancing Act

Looking more broadly, the difficulty in maintaining gains after surpassing Friday’s high shows a tug-of-war between buyers and sellers. If the support at 1.35397 holds, we might see a move higher, targeting the range of 1.3576 to 1.35918. However, if the price drops below this support level with strong momentum, it could lead to a downturn. Important moving averages, including the 100-hour, 100-day, and 200-hour averages, are clustered between 1.3446 and 1.34735 and will become the next targets if the decline continues. The pound has reached a new multi-week high against the dollar at 1.35558, but it is struggling to hold onto these gains. This hesitation follows last Friday’s rally, which was spurred by a weaker-than-expected US jobs report. The key level to monitor now is 1.35397; if it holds, the bullish sentiment remains alive.

Strategies For Traders

In light of this situation, traders who are optimistic about the pound’s potential for growth may consider buying call options with a strike price over 1.3576. This approach is backed by recent data showing UK inflation for August 2025 still high at 3.1%, putting pressure on the Bank of England to keep its firm stance. In contrast, the US is experiencing calmer wage growth, which may prompt the Federal Reserve to take a pause. However, if the price slips below 1.35397, it would indicate that the breakout has failed and confidence is diminishing. In this case, buying put options or setting up bear put spreads could be wise, targeting the support area around 1.3473. A similar sharp rejection occurred in spring 2024 when rate expectations diverged, resulting in a rapid 300-pip drop over two weeks. The current indecision in price action indicates a “tug-of-war,” which may raise short-term volatility. For traders who are unsure of the direction but anticipate a big move, a long straddle or strangle strategy could be suitable. This would allow them to benefit whether the pound breaks decisively higher or makes a sharp drop in the coming weeks. Create your live VT Markets account and start trading now.

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