🔍 Fundamental Overview
Sterling strengthens as Fed’s recent dovish actions contrast with a firm BoE outlook:
• Fed Cut & Dollar Weakness: U.S. initial claims (~227K forecast) and Fed’s third 25 bps cut mid-December have significantly undermined the dollar, pushing GBP/USD higher toward the 1.35 mark.
• UK Fundamental Support: UK services PMI revisions upward and a stable BoE have bolstered the pound; the pair briefly surpassed 1.35 during this week, supported by thin holiday liquidity.
• Mixed UK Data: Rising unemployment and cooling inflation (CPI down from 3.6% to 3.2%) are causing concerns about potential BoE rate cuts in 2026.
📊 Technical Analysis
• Support Levels:
o 1.3300 – Near-term pivot
o 1.3220–1.3200 – Key support area; breakdown could lead to deeper correction.
o 1.3050–1.3000 – Extended bearish target if below support.
• Resistance Levels:
o 1.3450 – 1.3500 – Major upside barrier; current early test zone.
o 1.3550 – 1.3600 – Next potential bullish target if broken.
• Indicators & Price Action:
o Weekly and daily charts show a neutral-to-bullish structure, with momentum building above key moving averages (21/50/200-day).
o A clear breakout above 1.3450–1.3500 would confirm bullish momentum; failure near these levels may lead to range trading or mild pullbacks.
📈 Trading Scenarios
✅ Bullish Setup:
• Entry: Break and close above 1.3450–1.3500
• Targets: 1.3550 ➡️ 1.3600
• Stop-Loss: Below 1.3380 or below 1.3300
• Catalysts: Continued USD softness, Fed dovish commentary, strong UK PMI or wage data
❌ Bearish Setup:
• Entry: Breakdown below 1.3300
• Targets: 1.3220 ➡️ 1.3050–1.3000
• Stop-Loss: Above 1.3450
• Catalysts: UK data pointing to slowing growth or BoE dovish shift, US data showing Fed reversal