GBP/USD is holding above the nine-day EMA near 1.3450, with a possibility of testing the three-month high of 1.3534. The 14-day RSI at 62.76 suggests strong momentum, while the immediate support is noted at the nine-day EMA at 1.3468.
On the first trading day of the year, GBP/USD traded around 1.3470 during Asian hours. The pair shows a weakening bullish bias, slightly below the ascending channel’s lower boundary.
Short Term Trend
The nine-day EMA is above the 50-day EMA, supporting a positive short-term trend. A daily close above 1.3534 could see movement towards the six-month high of 1.3726, following the channel’s upper boundary at 1.3750.
Failure to rebound could lead to consolidation. A break below 1.3468 and 1.3362 EMAs would challenge short- and medium-term progress. Further declines could see the pair near the eight-month low of 1.3010.
British Pound’s changes against currencies show it strongest against the Japanese Yen. The heat map demonstrates percentage changes across currencies, with GBP performing variably against other major currencies, such as USD (-0.01%) and EUR (0.00%).
Looking back at the bullish technical setup from early 2021, we saw the GBP/USD pair holding strong above key moving averages. Today, on January 2, 2026, the situation is more complex as the pair trades around 1.2850, driven less by pure trend and more by central bank policy divergence. The optimism of that time has been replaced by caution over the Bank of England’s next move on interest rates.
Market Uncertainty
The key difference now is the level of uncertainty, which is reflected in derivatives pricing. Implied volatility for GBP/USD options has ticked up, with the Cboe British Pound Volatility Index (BPVIX) now at 9.8, a notable rise from the 8.5 average seen in the final quarter of 2025. This suggests the market is pricing in a larger-than-usual price swing in the coming weeks.
For traders expecting positive UK economic data to force the Bank of England to remain hawkish, buying out-of-the-money call options offers a defined-risk way to bet on a rally. A move above the 1.3000 psychological level could be a viable target for options expiring in February or March. This strategy capitalizes on potential upside while limiting the initial cash outlay.
Conversely, with the latest UK inflation data for December 2025 coming in at a stubborn 2.8%, there is a significant risk of a downturn if the US Federal Reserve signals a more aggressive policy. Traders anticipating this can consider buying put options to profit from a move back towards the 2025 lows near 1.2600. For those simply expecting a big move but unsure of the direction, a long straddle strategy could capture a breakout.
We can recall how the strong momentum in early 2021 did carry the pound significantly higher, reaching above 1.42 by June of that year. That historical move shows how a confirmed trend can be very profitable. However, the fundamental backdrop today is entirely different, defined by persistent inflation rather than post-Brexit deal relief, so we must be prepared for two-way volatility.
