GBP/USD Price Forecast: Pound Holds Above 1.35 and Eyes a Break Toward 1.36

GBP/USD: Pound Holds Above 1.3500 as Dollar Weakens and Momentum Stretches Near 1.3600

GBP/USD grinds near 1.3560 after printing fresh three-month highs

GBP/USD has moved into a clearly constructive zone, trading most of the day between 1.3520 and 1.3560 after tagging a fresh three-month high at 1.3562 in early Asian dealing and then spiking again toward 1.3567 later in the session. The market is no longer fighting the 1.3500 handle; it is trading comfortably above it, which is exactly what you expect to see when buyers are in control. The prior three-month ceiling around 1.3520–1.3530 has flipped into intraday support, with price repeatedly defending that band after each shallow dip. The structure since mid-December is a clean series of higher lows and higher highs, and the latest push through 1.3525 and 1.3550 confirms that GBP/USD has transitioned from range trading into a genuine breakout phase, even if the move is now running into a thicker resistance belt around 1.3560–1.3600.

Momentum in GBP/USD is bullish but approaching exhaustion territory

The daily GBP/USD chart shows an aggressive momentum profile, with the 14-day Relative Strength Index sitting around 69.3, only a fraction below the overbought threshold at 70. That reading matches what price is telling you: upside pressure is still there, but the risk of a pause or shallow pullback is rising as each new high adds froth to the move. On shorter timeframes, intraday ranges of roughly 40–50 pips between 1.3520 and 1.3560 highlight steady buying rather than disorderly short-covering, but the combination of extended RSI and repeated failures to hold above 1.3560–1.3570 warns that momentum is no longer cheap. The market remains pointed higher, yet anyone chasing GBP/USD above 1.3560 is paying up into stretched conditions and leaning on increasingly narrow risk-reward unless the pair can clear 1.3600 decisively.

Trend structure and moving averages keep GBP/USD bias positive above 1.3470–1.3500

Trend and moving average alignment are unequivocally in favor of the Pound. On the daily chart GBP/USD trades above a rising 9-day exponential moving average near 1.3496, above the 50-day EMA around 1.3375, and above the 200-day simple moving average clustered close to 1.3385, with the 100-day SMA just under that at 1.3369. Short-term averages are stacked above the medium-term gauges, and all of them slope upward, a textbook bullish configuration. Price also rides along an ascending trendline drawn from the mid-December lows, with the line now intersecting around 1.3400, adding structural support beneath spot. Former resistance zones have been converted in sequence: 1.3473 acted as a key range cap late last year and is now part of a support band together with 1.3500 and 1.3520–1.3530. Deeper on the chart, the eight-month low around 1.3010 marks the line where the entire medium-term bullish narrative would be questioned; as long as GBP/USD remains comfortably above the 1.33–1.34 corridor and rides the 50- and 200-day averages, the path of least resistance stays higher.

Macro backdrop: weaker USD and firm UK services support GBP/USD around 1.35

The broader backdrop continues to tilt in favor of the Pound against the Dollar. The US Dollar Index is trading in the 98.2–98.6 region after a second consecutive daily decline, having slipped from resistance near 98.85 and now hovering just above technical support around 98.15. The driver is not geopolitics; markets have largely faded the latest US-Venezuela headlines, judging that the situation is not severe enough to trigger a lasting flight to safety in the USD. The real drag comes from the data and the policy narrative. US manufacturing is under pressure, with the ISM Manufacturing PMI falling to 47.9 in December, its third straight month in contraction and the weakest print since October. Services are still expanding but slowing, with the Services PMI easing to 52.5 and the Composite index slipping to 52.7, both modest downticks from November. That combination of sub-50 manufacturing and softening composite growth feeds the story that the US economy is cooling into 2026.

On the policy front, Federal Reserve communication is no longer hawkish. One influential policymaker describes the current stance as roughly neutral, flagging rising unemployment risks even as inflation drifts lower. Another explicitly argues that the central bank should be prepared to cut policy rates by around 100 basis points during 2026, conditional on incoming data. That mix pulls US yields lower at the margin and chips away at the Dollar’s carry advantage, particularly versus currencies where central banks are less eager to ease. On the UK side, the latest Services PMI prints around 51.4, slightly above 51.3 previously and safely in expansionary territory. More importantly, survey details highlight that input costs for service providers increased at the fastest pace in seven months, reinforcing the message that domestic inflation pressure is not fully extinguished. That matters for GBP, because it reduces the Bank of England’s room to deliver aggressive rate cuts; markets must respect the risk that UK policy stays tighter for longer than US policy, especially if services inflation proves sticky. The combination of a softer USD and a Bank of England that cannot relax too quickly is exactly the macro cocktail that tends to keep GBP/USD supported above 1.3500.

Short-term map for GBP/USD: support clustered at 1.3500–1.3530, resistance stacked into 1.3650

From a level perspective, GBP/USD sits in a dense zone where both sides have clear lines in the sand. On the downside, immediate support starts around 1.3530–1.3520, the former breakout area, then steps down to the round figure at 1.3500. Slightly below, 1.3496 (the 9-day EMA) and 1.3473 (a prior range boundary that produced profitable reversals in late December) form the first serious demand pocket for dip-buyers. Beneath that, the rising trendline around 1.3400 lines up with the 50-day EMA at 1.3375 and the 200-day SMA at 1.3385, building a wider support block in the 1.3370–1.3400 band. Only a sustained break under this region would signal that the current bullish swing in GBP/USD is losing its core structure and that a retest of deeper levels such as 1.3369 or even 1.3010 is back on the table.

On the topside, resistance is layered tightly. The first intraday caps sit near 1.3561 and 1.3567, where repeated pushes have been rejected. Above those, 1.3580–1.3587 forms a short-term supply band just below the psychological 1.3600 mark. Clearing 1.3600 on a daily closing basis would open the way to the prior six-month high at 1.3726, followed by 1.3788, which is the highest level for GBP/USD since October 2021. That zone between 1.3726 and 1.3788 is where medium-term players will reassess whether the Pound is becoming over-extended against the Dollar on a multi-month horizon. For now, the market is still working on the more modest job of deciding whether it can convert 1.3560–1.3600 from ceiling into a new floor.

Dollar index behavior frames upside room for GBP/USD

The Dollar’s own technical structure defines how far GBP/USD can realistically squeeze in the near term. The US Dollar Index is trading around 98.26, clinging to support near 98.15 at the lower edge of a rising channel. Above spot, resistance is marked at 98.50, then 98.85, and finally 99.07, the approximate top of that channel. As long as the index remains capped below 98.85–99.07, the backdrop is consistent with a gently softer USD, giving GBP/USD scope to keep pressing higher into the 1.36+ area on dips in Dollar sentiment. However, if the Dollar Index bounces decisively from 98.15 and breaks above 98.85–99.07, the setup changes: such a move would tighten global financial conditions, pull capital back into the Dollar, and make it much harder for GBP/USD to hold above 1.3500. The line is clear: Dollar capped below 99.0 favors a constructive tone for the pair; a break and hold above 99.0 would warn that the current Pound rally is vulnerable.

Intraday strategy zones: where active traders are leaning in GBP/USD

Short-term strategies around GBP/USD are built tightly around the current price band. Active traders have been focusing on a cluster of levels both above and below spot. On the downside, zones around 1.3546, 1.3531, and 1.3502 have been flagged as attractive areas for fresh long exposure when price dips and prints clear bullish reversal patterns on the hourly chart. These areas align with the broken resistance band and with the gravity of the 9-day EMA. The logic is straightforward: as long as GBP/USD holds above 1.3500–1.3520, pullbacks into this region offer asymmetric reward relative to well-defined stops placed just below recent intraday lows.

On the topside, 1.3561, 1.3587, and 1.3656 are being watched as tactical selling or profit-taking levels if the market shows signs of rejection, such as long upper wicks or hourly closes that fail to stick above resistance. The 1.3600–1.3650 belt in particular is the area where short-term longs will start locking in gains and where contrarian shorts may attempt to fade the move, especially with daily RSI already pressing into the high-60s. For traders managing risk tightly, classic intraday rules are being applied: partial profit-taking on 25-pip moves, stop-losses moved to breakeven once trades are comfortably in the money, and sizing kept moderate given how close the pair is to major resistance.

Cross-currency performance confirms underlying demand for GBP

The behavior of GBP across the board backs up what GBP/USD is signaling. On a daily snapshot, Sterling is up around 0.09% versus the USD, essentially flat versus the EUR, and notably stronger against the JPY, confirming that the Pound is one of the better-bid majors in the current environment. On a weekly horizon, GBP has gained roughly 0.26% against the USD, about 0.55% against the EUR, and approximately 0.61% versus the CHF, while only slightly underperforming commodity currencies such as the AUD and NZD. That cross-currency picture tells you this is not a Dollar-only story; there is standalone appetite for GBP driven by the UK’s relative growth and inflation mix and by the perception that the Bank of England will be slower to loosen policy than some peers. When a currency is outperforming safe-havens like the CHF and JPY while also holding gains against the USD, it usually indicates that buying interest is anchored in more than a single data point or headline.

Event risk and data calendar: what matters next for GBP/USD around 1.35

Near-term event risk is skewed toward the US side of the pair, which keeps GBP/USD sensitive to incoming American data and Fed rhetoric. This week’s calendar centers on labor and services activity: private payroll figures, services-sector surveys, and job-openings data will all feed into the debate about whether the US economy is cooling fast enough to justify a full 100 bps of cuts in 2026, as some policymakers are now openly considering. A weaker-than-expected labor print or a further loss of momentum in services would likely push the Dollar Index back toward 98.15 and support another leg higher in GBP/USD toward the 1.3580–1.3650 zone. Conversely, a stronger-than-expected employment report that keeps unemployment low and wage growth firm would challenge the easing narrative, lift the Dollar, and put the 1.3500–1.3520 support band under immediate pressure.

On the UK side, the near-term calendar is lighter, but that does not mean Sterling is insulated. Markets will continue to focus on how the Bank of England interprets the latest services PMI at 51.4 and the fact that input prices in that sector have risen at the fastest rate in seven months. Any sign from future commentary that the BoE is more worried about inflation persistence than about growth softness would be taken as constructive for GBP, because it would imply a shallower and later cutting cycle relative to the Fed. The absence of heavy domestic data in the immediate term means GBP/USD will mostly trade as a Dollar story for the next few sessions, but the underlying UK inflation profile quietly supports buying the Pound on dips.

Verdict on GBP/USD: bullish bias, rated as a buy on dips rather than at the highs

Putting the pieces together, the case on GBP/USD is clear. Price is trading around 1.3520–1.3560, above all key moving averages and above the psychologically important 1.3500 handle. Momentum is strong, with daily RSI near 69, and the structure since mid-December is a well-defined uptrend supported by a rising trendline around 1.3400 and by the 50- and 200-day averages near 1.3375–1.3385. The macro environment favors the Pound: the Dollar Index is pinned under 99.0, US manufacturing sits in contraction at 47.9, services activity is cooling, and influential Fed voices are now openly discussing as much as 100 basis points of cuts in 2026. At the same time, UK services remain in expansion near 51.4, and services-sector input prices are accelerating, which limits how aggressively the Bank of England can ease. Cross-asset and cross-currency flows show GBP outperforming safe-havens and holding gains against the USD, confirming that Sterling strength is broad-based.

The only real negative for bulls is positioning and overextension: GBP/USD is pressing into a dense resistance cluster at 1.3561–1.3600, with further supply expected around 1.3650, 1.3726, and 1.3788, while momentum indicators flash overbought. That combination argues against blindly chasing longs into 1.36+ levels. The cleaner trade is to stay bullish on the pair but demand a better entry. On that basis, GBP/USD is best classified as a buy on dips, not a fresh breakout buy at the current highs. Pullbacks toward 1.3530–1.3500, and in extension toward 1.3473, offer more attractive risk-reward for new long positions, with upside targets initially at 1.3600–1.3650 and, if the Dollar remains under pressure and the Fed moves closer to easing, a potential medium-term push toward 1.3726–1.3788. Only a decisive loss of 1.3400, and especially a break through the 1.3375–1.3385 moving-average cluster, would force a reassessment of this bullish stance on GBP/USD.

That's TradingNEWS