The GBPUSD pair rose today after stabilising earlier in the week within a lower range of 1.3360 to 1.3378. The pair saw increased buying interest once it moved above its 100-hour moving average at 1.3416, gaining further strength in the early U.S. session.
The rise brought the pair into a higher range between 1.3448 and 1.3475, coinciding with the 50% midpoint of the range since May’s low at 1.3464. The day’s high was 1.34745, close to the upper limit of this zone, but it failed to break through. Consequently, the pair retracted lower, now trading below the low of the swing area at 1.3448.
Key Support And Resistance Levels
Buyers earlier reclaimed the 100-hour MA and briefly rose above the 50% midpoint but could not maintain that position or reach the 200-hour moving average. The failed attempt above 1.3464 acts as a risk level for sellers and a target for buyers seeking control.
On the downside, the 100-hour MA at 1.3416 is a pivotal support. From the current level near 1.3435, a reversal toward this MA is possible. If it breaks, sellers may gain momentum, possibly revisiting the support zone from 1.3378 to 1.3360.
We believe the recent failure at the 1.3475 resistance level signals a prime opportunity for derivative traders. The inability to hold gains above the key midpoint suggests underlying weakness, making strategies that profit from a decline or consolidation attractive. Therefore, we are looking at buying put options or establishing bear put spreads to capitalize on a potential move back toward the lower support levels.
This cautious view is supported by recent economic data, as UK inflation remains stubbornly high. The latest figures from the Office for National Statistics show the Consumer Prices Index (CPI) at 3.9%, which, while down, is still nearly double the Bank of England’s target and complicates the path for future rate policy. This uncertainty from Governor Bailey’s camp is likely to act as a cap on the pound’s strength in the near term.
Economic Outlook And Trading Strategy
In contrast, the U.S. economy shows more resilience, with the latest Non-Farm Payrolls report showing a robust addition of 216,000 jobs, far exceeding forecasts. This strong labor market gives the Federal Reserve more leeway to maintain a hawkish stance to ensure inflation is fully contained. Such policy divergence historically favors the U.S. dollar, adding further downward pressure on this currency pair.
For a direct bearish play, we see value in purchasing put options with a strike price just below the critical 100-hour moving average at 1.3416. A convincing break of this support would signal a shift in momentum, likely accelerating a decline toward the 1.3360 swing area. Historical patterns show that a rejection at a major 50% retracement level often leads to a retest of the previous low.
However, should the market reverse and buyers reclaim the 1.3475 level with conviction, we would need to pivot quickly. A sustained move above this zone would invalidate our bearish thesis and could be played by purchasing call options. This would signal that the initial selling pressure has been absorbed and that a new leg up is beginning.
