Sterling gave back part of Monday’s advance on Tuesday as the US Dollar found support after hawkish remarks from Federal Reserve Governor Christopher Waller. GBP/USD held most of its gains and stayed above 1.3420, trading around 1.3424 after failing to sustain a move above 1.3450. Waller pointed to the possibility of a 50-basis-point rate rise in December if consumer inflation remains elevated.
Markets also looked ahead to preliminary US Consumer Price Index figures for October due later on Tuesday, although the release will omit year-on-year data because of the 2025 Federal Government shutdown. That missing component limits the usefulness of the report for gauging the central bank’s next policy steps, and the immediate reaction across US Dollar pairs is expected to be restrained. Technically, the uptrend remains intact but momentum is cooling, with RSI drifting towards 50 and MACD still marginally positive; resistance sits around 1.3500 and 1.3570, while support is seen near 1.3360 and 1.3340, with further downside levels at 1.3270 and the YTD low around 1.3140.
GBP/USD Trading Strategies and Key Levels
We suggest derivative traders adopt a cautious, range-bound stance in the coming weeks as GBP/USD struggles to clear the critical 1.3450 resistance. With momentum indicators like the RSI leveling off toward the 50 mark, holding unhedged long positions carries higher risk right now. Traders can consider range-bound strategies or wait for a clear breakout before taking big directional trades.
If we see a clean move above 1.3450, derivative buyers should target the 1.3500 level and the September peak near 1.3570. Historically, GBP/USD breakout moves from ascending channels expand by 100 to 150 pips once upper resistance breaks. Utilizing call options allows traders to participate in this potential upside while strictly limiting downside risk.
Managing Downside Risk and Market Volatility
On the downside, we need to monitor the critical channel support between 1.3360 and 1.3340. A break below 1.3340 invalidates the bullish setup and opens a path toward 1.3270, with further risk toward the year-to-date low around 1.3140. Traders holding long positions should consider buying put options as a hedge or placing disciplined stop-loss orders below 1.3340.
Hawkish signals from the Federal Reserve regarding potential 50-basis-point rate hikes can rapidly boost the US Dollar. Data shows that major currency derivatives experience volatility spikes of over 15% during periods of monetary policy shifts. Keeping leverage low and position sizes conservative over the next few weeks will protect portfolios from unexpected market swings.
