19.12.202504:42 Forex Analysis & Reviews: GBP/USD Overview. December 19. The Bank of England Implemented Another Easing

The GBP/USD currency pair has been trading more actively than the EUR/USD over the past two days. However, it has not shown any particularly interesting movements, which can be seen across almost any time frame. Most traders were likely hoping for more volatile, trend-driven movements this week, but objective reality has dashed those hopes once again. Nevertheless, several important points should not be overlooked and offer an optimistic outlook for the future.

For us, optimism now comes from the realization of the forecast we have been discussing throughout 2025. We believe nothing has fundamentally changed for the U.S. dollar globally over the past six months. Therefore, we continue to expect only its decline. This week, the British pound faced selling pressure twice but lost only a minor amount. First, inflation came in significantly below expectations, and then the Bank of England, as expected, lowered its key interest rate. However, let us examine these two events in detail and determine whether a collapse of the British currency was warranted.

Inflation has decreased, giving the Bank of England the "green light" to ease monetary policy. Essentially, these two events can be combined into one. However, most experts were already confident in a cut to the BoE's key interest rate even before the inflation report was published. At the last meeting of the British central bank, four of the nine Monetary Policy Committee members voted for an easing of policy, with inflation at 3.6%. Thus, the BoE was already mentally prepared for a reduction. The market was waiting for this decision, and since it was waiting, it had priced it in advance. Therefore, neither the inflation report nor the BoE's meeting should have provoked a significant decline in the British currency.

The GBP/USD pair stayed near its local highs, and on the daily time frame, we see that a classic three-wave correction has formed in recent months. We want to remind you that such a correction should not have occurred at all, as the last leg of the pair's decline was completely illogical. The market reacted around 10 times to confusion over the British budget for 2026, and during Rachel Reeves's speeches, the pound was sold even when the UK's Chancellor mentioned healthcare issues.

The market also deemed it unnecessary to react to two rounds of Federal Reserve monetary policy easing or the US "shutdown." Consequently, in early November, the British pound was too oversold, and the dollar was overbought. This occurred within the upward trend of 2025. Thus, we continue to believe that the trend persists, the global fundamental background has not changed, and Trump, meanwhile, is planning to start a full-scale war with Venezuela. The peacemaker president was unable to resolve the conflict in Ukraine in an entire year, and even other conflicts that "Trump resolved" flare up from time to time with renewed vigor. The dollar remains in a challenging position.

The average volatility of the GBP/USD pair over the last five trading days is 86 pips. For the pound/dollar pair, this value is considered "average." On Friday, December 19, we thus expect movement within a range of 1.3306 to 1.3477. The upper channel of the linear regression is directed downward, but only due to a technical correction on higher time frames. The CCI indicator entered the oversold zone six times over the last few months and formed several "bullish" divergences, which constantly warned of a resumption of the upward trend. Last week, the indicator formed another bullish divergence, but the week concluded with two entries into the overbought area and two "bearish" divergences. Conclusion: correction within the upward trend.

Nearest Support Levels:

S1 – 1.3367

S2 – 1.3306

S3 – 1.3245

Nearest Resistance Levels:

R1 – 1.3428

R2 – 1.3489

R3 – 1.3550

Trading Recommendations:

The GBP/USD currency 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 US currency to appreciate. Thus, long positions with targets of 1.3489 and 1.3550 remain relevant in the near term, provided that the price is above the moving average. If the price is below the moving average line, small short positions with targets of 1.3306 and 1.3245 may be considered on technical grounds. From time to time, the US currency shows corrections (in the global context), but for a trend strengthening, it needs signs of the end of the trade war or other global positive factors.

Explanations for Illustrations:

• Support and resistance price levels are marked by thick red lines, where movement may conclude. They are not sources of trading signals.
• The Kijun-sen and Senkou Span B lines are Ichimoku indicator lines transferred to the hourly timeframe from the 4-hour timeframe. They are strong lines.
• Extremum levels are marked by thin red lines, where the price previously bounced. They are sources of trading signals.
• Yellow lines represent trend lines, trend channels, and any other technical patterns.
• Indicator 1 on the COT charts shows the size of the net position of each category of traders.