Potential signal:
Sell GBP/USD at the 1.3340 with a stop loss at 1.3475 and a target of 1.3310
- The 1.35 level continues to be an area of significant resistance and now we find ourselves hanging around the 50-day EMA.
- At this point, it might be showing signs of rolling over.
- The British pound initially rallied on Friday, but you can see it starting to slump a bit, which is not a huge surprise because, as I look at this chart, it is starting to show signs of fatigue.
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The Bank of England has been a little bit steadier as far as its interest rates are concerned and whether or not it is going to cut rates in comparison to many other central banks. But you can say the same thing about the Federal Reserve, and that is playing out on this chart.
The 1.35 level continues to be an area of significant resistance, and now we find ourselves hanging around the 50-day EMA. If we can, in fact, break down below the 1.3350 level, an area that I felt like I talked about most of last year, then it opens up the move to the 200-day EMA, perhaps even down to 1.32.
I’m not calling for the collapse of the British pound, nothing like that, but I do think the US dollar is going to spend quite a bit of time strengthening in the first six months of 2026, despite the interest rate cuts coming.
Critical Levels
The British pound would have to break above the 1.3550 level for me to change my opinion on this chart. Therefore, I remain pretty bearish.
I would approach it one of two ways, either shorting a breakdown or fading signs of exhaustion after short-term rallies. It is essentially what we had on Friday.
Speaking of going forward, Monday is Martin Luther King Jr. holiday in the United States, so Americans won’t be on board. Keep that in mind; it will affect liquidity.
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