The GBP/USD currency pair also showed significant growth for most of Monday. The reasons are the same as for the EUR/USD pair. Both currency pairs have been in correction mode for the past couple of weeks following a sharp rise at the end of January. Previously, there was a seven-month flat period for the euro and a four-month correction for the pound. In both cases, the trend remains upward, so any decline is by default a correction.
This week, there have been no local grounds for selling the American currency. However, such grounds may emerge on Wednesday. On that day, the Nonfarm Payrolls and unemployment rate reports from the US will be published, which were originally scheduled for release last Friday. Now, the dollar is waiting for these reports like a verdict. We have previously noted that traders have practically stopped reacting to macroeconomic data. However, in most cases, they concern positive data for the dollar. For instance, the ISM business activity indices published last week resulted in only a very subdued strengthening of the American currency. Even the earlier GDP report for the fourth quarter failed to provoke a market reaction. Why?
Because the market no longer believes Trump. On paper, everything is super for the American president. The economy is growing, the budget is receiving hundreds of billions of dollars, America will soon be great again, and it will be a country only for Americans, most of whom are immigrants in one way or another. Everything is just wonderful. However, living standards in the US are falling, prices are rising, and Washington has turned against half the countries in the world. While world leaders may smile when meeting Trump, it is only because they do not want to hear accusations of disrespect for the leader of the White House and face new tariffs or sanctions the next day. We have entered an era where tariffs or sanctions do not require unfair trade practices or harm to other states. It is enough to find oneself in the line of fire of the American leader. Unfortunately, the US wields tremendous power, which is currently concentrated in the hands of one person. Very few countries around the world are prepared to withstand the blow and respond in kind.
Returning to the British pound, it will continue to rise, not because everything is wonderful in the UK economy and politics. It will rise because the dollar will fall. Therefore, it is generally unimportant what news comes from the British Isles. Last week, the British currency declined after the Bank of England took a more "dovish" stance than the market had anticipated. But as we can see, by Monday, the pound had fully recovered. This reaffirms the fact that any decline in the pair right now is merely a correction or retracement, after which the upward trend will resume.
Thus, we still expect the British pound to reach the psychological level of 1.4000 and do not consider this to be the limit of the pair's growth in 2026.
The average volatility of the GBP/USD pair over the last 5 trading days is 103 pips. For the pound/dollar pair, this value is considered "average." Therefore, on Tuesday, February 10, we expect movement within the range bounded by levels 1.3563 and 1.3769. The upper channel of the linear regression is oriented upwards, indicating a trend recovery. The CCI indicator has entered the oversold zone six times over the past months. It has formed numerous "bullish" divergences, which have consistently warned traders about an impending upward trend resurgence. The entry into the overbought zone warned of the onset of a correction, which may already be completed.
Nearest Support Levels:
- S1 – 1.3550
- S2 – 1.3428
- S3 – 1.3306
Nearest Resistance Levels:
- R1 – 1.3672
- R2 – 1.3794
- R3 – 1.3916
Trading Recommendations:
The GBP/USD currency pair is on track to continue its 2025 upward trend, and its long-term prospects remain unchanged. Trump's policies will continue to exert pressure on the US economy, so we do not expect the US currency to grow in 2026. Even its status as a "reserve currency" no longer holds much significance for traders. Therefore, long positions with targets of 1.3916 and above remain relevant for the near term as long as the price is above the moving average. If the price is below the moving average line, small shorts can be considered with a target of 1.3550 based on technical (correction) factors. From time to time, the American currency exhibits corrections (on a global scale), but for a trend growth to occur, it needs global positive factors.
Explanations of the Illustrations:
- Linear regression channels help determine the current trend. If both are directed the same way, it means the trend is strong at the moment.
- The moving average line (settings 20.0, smoothed) defines the short-term trend and the direction in which trading should currently be conducted.
- Murray levels are target levels for movements and corrections.
- Volatility levels (red lines) indicate the likely price channel in which the pair will move over the next day, based on current volatility readings.
- The CCI indicator's entry into the oversold area (below -250) or overbought area (above +250) indicates a potential trend reversal in the opposite direction.
