Momentum Analysis

The Pound Sterling (GBP) may approach the significant support level of 1.3370, although we do not see a strong increase in downward momentum. Analysts at UOB Group believe that GBP could eventually drop to 1.3340. Last week, GBP reached a low of 1.3418, followed by 1.3393. It finished the New York session at 1.3402, reflecting a 0.30% drop. Current resistance levels stand at 1.3420 and 1.3440, and it seems unlikely that GBP will break below 1.3370. Recent findings indicate rising downside risks, with GBP now below the 1.3400 mark and reaching a low of 1.3393. However, momentum has not notably increased. GBP could fall within the 1.3340 to 1.3370 range but must remain under the strong resistance level of 1.3475. This article is prepared by the FXStreet Insights Team, gathering insights from market experts. It includes analysis and notes from both internal and external sources.

Current Economic Perspective

Reflecting on this time in 2025, a bearish outlook on the pound focused on a potential test of the 1.3370 support level. This historical context helps us understand similar pressures building today. The downward momentum observed back then sets a framework for assessing the current market. As of January 12, 2026, recent economic data supports a cautious outlook. Late 2025 figures revealed a 0.9% decline in UK retail sales, falling short of expectations, while wage growth hit its lowest point in over a year. This softening economy puts pressure on Sterling against a more resilient US economy. This fundamental weakness suggests that the GBP/USD pair may continue to face downward pressure in the coming weeks. We anticipate a downward trend, similar to last year but with different technical levels. Traders should consider positioning for a potential decline from the current price. For those wishing to act on this outlook, buying put options with a strike price below the current market is a straightforward way to profit from a downward move. This strategy allows exposure to the downside while limiting risk to the premium paid. Look at February expiration dates to give time for the move to unfold. A more conservative strategy is to use a bear put spread. This involves buying one put option and selling another with a lower strike price. This method reduces initial costs but also caps potential profits, making it ideal for targeting a specific price range. All bearish positions should be protected from sudden reversals. We are monitoring the 1.2980 level as a critical resistance point. A sustained break above this level would indicate that downward momentum has weakened, prompting a reevaluation of short-term bearish strategies. Create your live VT Markets account and start trading now.

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