GBP/USD Review: Week Preview. The Pound Can Open Champagne Calmly

[Ben Graham]

The GBP/USD currency pair showed ultra-weak volatility on Friday, but overall, the British pound is finishing the year in a very good position. Yes, it corrected significantly during the second half of 2025, even more so than the EUR/USD pair. However, in December, the British currency primarily rose and managed to surpass the Ichimoku cloud on the daily timeframe. Thus, the pound has everything it needs to continue its upward trend in 2026.

During the New Year week, both the UK and the U.S. have empty event calendars. In America, reports on jobless claims, manufacturing business activity (not ISM), and Chicago business activity will be released. In the UK, the manufacturing sector's business activity index will be published in its second estimate for December. None of the aforementioned data will attract much interest. December saw a large number of significant and impactful reports published in the U.S. and the UK, so the market now has a nearly complete picture of the state of the American and British economies. Now we need to await new data on key indicators: unemployment, inflation, and the labor market. These data will significantly influence the monetary policies of the Bank of England and the Federal Reserve, which continue to ease policy. We believe that the upward trend of 2025 will continue into 2026.

The average volatility of the GBP/USD pair over the last five trading days is 60 pips, which is considered "medium-low" for the pound-dollar pair. On Monday, December 29, we expect movement within the range limited by the levels of 1.3435 and 1.3555. The upper channel of the linear regression is downward-sloping, but this is solely due to technical corrections on the higher timeframes. The CCI indicator has entered oversold territory 6 times in recent months and has formed numerous "bullish" divergences, constantly signaling a resumption of the upward trend. Last week, the indicator formed another bullish divergence, again signaling a potential return to growth.

Nearest Support Levels:

• S1 – 1.3489
• S2 – 1.3428
• S3 – 1.3367

Nearest Resistance Levels:

• R1 – 1.3550

Trading Recommendations:

The GBP/USD pair is attempting to resume the upward trend of 2025, and its long-term prospects remain unchanged. Donald Trump's policies will continue to exert pressure on the dollar, so we do not expect the American currency to appreciate. Thus, long positions targeting 1.3550 and 1.3555 remain relevant in the near term as long as the price is above the moving average. If the price is below the moving average line, minor shorts can be considered with targets of 1.3367 and 1.3306 on technical grounds. Occasionally, the American currency shows corrections (in a global sense), but for trend strengthening, it needs signs of resolution in the trade war or other global positive factors.

Explanations to Illustrations:

• Linear Regression Channels help determine the current trend. If both are aligned in the same direction, the trend is strong.
• Moving Average Line (settings 20.0, smoothed) indicates the short-term trend and the direction in which trading should be conducted.
• Murray Levels – target levels for movements and corrections.
• Volatility Levels (red lines) indicate the probable price channel in which the pair will stay over the next day, based on current volatility indicators.
• CCI Indicator – its entry into oversold territory (below -250) or overbought territory (above +250) signifies an approaching trend reversal in the opposite direction.

The material has been provided by InstaForex Company - www.instaforex.com