GBP/USD eased after surrendering part of the prior session’s rally, following reports about the make-up of a prospective Burnham administration. UK releases were mixed: May GDP beat forecasts, rising 0.7% on a 3m/3m basis, while May Industrial Production fell 0.5% M/M. The trade deficit narrowed, with components described as uneven.
Technically, Scotiabank points to the early July bull reversal as still intact, with a fresh short‑term cycle high and trend oscillators aligned across short-, medium- and long-term horizons. That configuration supports the view that minor pullbacks can be used to add exposure, with GBP/USD seen capable of retesting 1.3650 in the near term. Elsewhere, EUR/GBP rebounded from a one‑year low set the previous day, yet the broader technical picture is still framed as constructive for sterling.
Sterling Pullback Viewed as Buying Opportunity for Derivative Traders
We see the recent minor pullback in the British Pound as a prime buying opportunity for derivative traders looking to capture the next leg of this sterling bull run. The market is reacting favorably to a more centrist, market-friendly political shift in the UK, which has helped offset mixed economic data like the recent 0.7% quarterly GDP growth. Derivative traders should look to establish long positions on these minor dips, targeting a retest of the 1.3650 level in the coming weeks.
Technical and Strategic Rationale Supporting Sterling Upside
To back this view, we look at historical patterns where a move toward 1.3650 would bring the currency pair back to key levels last sustained in early 2022 when GBP/USD peaked near 1.37. Furthermore, recent options market data shows a growing bias toward GBP calls, with short-term risk reversals shifting in favor of sterling upside. This technical strength is well-supported by the UK’s narrowing trade deficit and overall solid economic expansion in the first half of the year.
For those trading options, we recommend buying out-of-the-money call options or implementing bull call spreads targeting the 1.3500 and 1.3650 strikes to limit premium costs. Futures traders should consider entering long contracts on intraday pullbacks, keeping stop-losses just below the early July reversal support levels. As trend oscillators remain in a bullish alignment across short-, medium-, and long-term charts, riding this momentum offers a highly favorable risk-reward ratio.
