Recent data from the UK shows that the industrial sector is doing well, which has helped the Pound Sterling (GBP) gain strength after stabilizing around the 1.32 level. Members of the Bank of England have talked about the ongoing issues with inflation and suggested that they might need a “more restrictive for longer” approach. This positive data and the possibility of the Bank of England keeping its current position until early 2026 could bolster the pound. Nevertheless, short-term charts hint at a slight risk of weakness, especially with the 6-hour chart indicating a possible peak due to a bearish pattern seen in the European morning session.

Promising Weekly Charts

Despite short-term ups and downs, the weekly charts for GBP/USD show favorable trends thanks to a bullish ‘engulfing’ pattern. Although short-term losses could drop to 1.34 or just under, we expect support to hold. Resistance stands at 1.3470/75, with a chance to rise back to the mid-1.35 range. The pound is gaining strength, supported by robust UK economic data. This week’s industrial production numbers revealed a 0.4% increase for August, boosting confidence after the spot price found solid support near the mid-1.32 area. This uptrend occurs even as the GBP/USD pair pulls back a bit from its recent highs. The Bank of England’s firm stance against inflation is crucial for keeping the pound stable. After the CPI data for September showed inflation at 2.8%, comments from policymakers about maintaining “restrictive for longer” rates at 5.25% seem reliable. This situation contrasts with growing speculation that the US Federal Reserve might pause its tightening cycle, creating a favorable environment for the pound. For derivative traders, any short-term drops to the 1.3400 level should be seen as potential buying opportunities. Selling out-of-the-money puts with strike prices around 1.3350 could be a good strategy to earn premium, taking advantage of the strong market support. This strategy aligns with the bullish “engulfing” pattern on the weekly chart, indicating upward momentum despite short-term softness.

Upside Strategies

Looking ahead, call options with strike prices above the 1.3475 resistance level are appealing as we approach month-end. A clear break above this level could lead to a quick move towards the mid-1.35s, a level we haven’t consistently maintained since the third quarter of 2024. Considering the current fundamentals, we believe the pound is likely to strengthen in the coming weeks. Create your live VT Markets account and start trading now.

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