GBP/USD rose from near the 1.3500 level and reached a more than one-week high in Asian trading on Monday. It traded just below the mid-1.3500s, up 0.10% on the day.
The US Dollar weakened after reports that Iran gave the US a new proposal on reopening the Strait of Hormuz and ending the war. Lower oil prices reduced inflation concerns and eased expectations for a hawkish Federal Reserve, adding pressure on the dollar.
Pound Supported By Policy And Technical Signals
Expectations of further Bank of England policy tightening this year supported the pound. The pair had pulled back from the 1.3600 area, described as a two-month peak, and then stabilised ahead of the 200-day simple moving average and the 38.2% Fibonacci retracement of the January–March fall.
The move above the 50% retracement level kept the upward bias intact. RSI was near 59 and MACD stayed in positive territory.
Resistance sat near the 61.8% retracement at 1.3608. Support levels were 1.3523, then 1.3437 and 1.3332, with 1.3161 as a further downside level.
The technical analysis was produced with help from an AI tool.
Option Strategies For A Move Higher
Given the expected weakening of the US dollar and strength in the pound, we should consider strategies that profit from a rise in GBP/USD toward the 1.3600 area. Buying call options with a strike price near 1.3550 would provide direct exposure to this upward move with a defined risk. A more conservative approach would be a bull call spread, which would lower the upfront cost of the trade.
Looking back at this forecast from early 2025, we recall the temporary optimism regarding US-Iran relations that briefly softened the dollar. This geopolitical development was a primary driver for the pound’s rally at that time. However, we now know that those peace hopes faded by the second quarter of 2025, which ultimately put a ceiling on this particular currency move.
The bets on Bank of England policy tightening were well-founded, as we saw them raise the Bank Rate in May of 2025 to combat inflation. UK inflation statistics from that period, which we can now see averaged 4.2% in the first half of 2025, provided the fundamental support for a stronger pound. This data confirms why the pound was able to gain ground against other currencies.
Conversely, the market’s hope for a less aggressive Federal Reserve was premature. US inflation data for the first quarter of 2025 came in stubbornly high, with core CPI averaging 3.8%, preventing the Fed from signaling any policy pivot. This underlying US economic strength is why the dollar’s weakness was short-lived and the GBP/USD rally eventually stalled below 1.3700.
For traders, the technical levels mentioned were crucial for executing positions. The 1.3608 resistance level was the clear target for taking profits on long positions initiated around the 1.3500 handle. The support at 1.3437 acted as a vital line in the sand; a breach of this level would have been our signal to exit bullish trades.
