The GBP/USD pair plunged about 160 pips on Tuesday and continued to fall calmly on Wednesday without a correction. In recent weeks, the pound at least gave traders relatively logical, orderly moves that matched fundamentals, geopolitics, or macro data. But this week sterling risks entering another free fall — triggered by an arguably disproportionate market reaction to the US inflation report.
Yes, the Federal Reserve may now be forced to deliver two more rate hikes, but wasn't that scenario already priced in before the inflation release? And where does the Bank of England fit in? The BoE only began its tightening cycle a week earlier and therefore could, in aggregate, raise rates more than the Fed. If both central banks are tightening, you shouldn't expect only one currency to rise—the dollar isn't isolated from the rest of the FX market.
That said, the pound has still traded logically at times. The current GBP/USD decline doesn't change the bigger picture. Daily and weekly timeframes still show sideways channels in which price has traded for a year. Within a flat market, random swings are normal: a flat is when the market either accumulates positions for a future trend or distributes them after a trend ends. Either way, these are deliberate market actions. When a new trend is being prepared, the direction has effectively already been chosen; after a trend ends, the market prepares for the next one.
Thus, sterling could fall to 1.3200, and this would not change the long-term outlook. Fundamentals still do not point to a durable downtrend. Sideways channels on weekly and daily charts remain intact. Geopolitics is easing to some degree: after the congressional election, Donald Trump has far fewer cards to play. Democrats have already moved to remove Defense Secretary Pete Buttigieg, signaling intense opposition to the administration.
Next year, Congress will fight over every bill. Trump may not be able to secure higher military budgets, making a prolonged war with Iran politically difficult to sustain — likely forcing a halt to hostilities on whatever terms can be achieved. US voters also sent a clear message on tariffs and the Iran policy; had they supported those stances, Trump's party would have won.
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." On Thursday, November 12, we therefore expect movement within a range bounded by 1.3177 and 1.3383. The major linear-regression channel has turned down again. The CCI indicator has not recently entered overbought/oversold areas or formed divergences.
Nearest support levels:S1 – 1.3245
S2 – 1.3184
S3 – 1.3123
Nearest resistance levels:R1 – 1.3306
R2 – 1.3367
R3 – 1.3428
Trading recommendations:The GBP/USD pair continues an uptrend that could become part of the broader 2022 global trend. Donald Trump's policies will continue to put pressure on the US economy, so we do not expect long-term appreciation of the US dollar. In 2026, the dollar has been positive so far due to geopolitics and inflation, which drove capital to safety and prompted the Fed to return to monetary tightening. However, on the weekly timeframe, the dollar has traded flat between 1.3150 and 1.3780 within a four-year uptrend, supporting expectations of sterling appreciation in the medium term. Long positions with targets of 1.3489 and 1.3523 can be considered when the price is above the moving average. Price below the moving average allows downside trading, with targets of 1.3245 and 1.3184.
Notes on the charts:Linear-regression channels help identify the current trend. If both channels point the same way, the trend is strong.The moving average (settings 20,0, smoothed) defines the short-term tendency and the direction in which you should trade now.Murray levels are target levels for moves and corrections.Volatility levels (red lines) indicate the likely price channel the pair will inhabit over the next day based on current volatility.CCI indicator — entries into the oversold area (below -250) or overbought area (above +250) suggest a trend reversal may be imminent.