**GBP/USD Weekly Forecast: 28/12/2025 to 02/01/2026**
*Adapted from the original analysis by Christopher Lewis, DailyForex.com*
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The GBP/USD pair concluded the last full trading week of 2025 on a muted note, reflecting the broader theme of low liquidity typical of the end-of-year period. As we head into the week spanning December 28, 2025, to January 2, 2026, the market’s attention is split between lingering macroeconomic uncertainties and the potential for a resurgence in volatility as institutional players return after the holidays. This weekly forecast explores the key drivers, technical outlook, and potential scenarios for the major currency pair in the transitional holiday week.
**Key Market Drivers for GBP/USD**
Several themes have been shaping the GBP/USD pair recently. For traders mapping out potential strategies for the coming week, the following factors will be critical in shaping price action:
– **Limited Liquidity**
– Year-end trades have already thinned, making price movements potentially more erratic due to reduced participation.
– Greater susceptibility to news-driven volatility and order book gaps is to be expected.
– **US Economic Data & Fed Policy**
– The December FOMC meeting and subsequent commentary suggested that the Federal Reserve is contemplating the end of its rate-hiking cycle, with market participants increasingly pricing in a pivot towards easing in 2026.
– Any surprise in macroeconomic releases, such as jobless claims or the final revisions to Q4 GDP, can stir sharp moves in the dollar.
– **UK Macroeconomic Landscape**
– Recent UK data has painted a mixed picture. While growth remains fragile, inflation shows signs of persistence.
– The market’s ongoing debate is whether the Bank of England will need to maintain tighter policy for longer even as growth risks build.
– **Technical Factors**
– The GBP/USD finds itself at an inflection point in the charts, with key moving averages converging and prior resistance turning into new support.
– **Geopolitical Developments**
– Persistent geopolitical risks, particularly in Eastern Europe and the Middle East, add further layers of uncertainty, driving periodic flows into and out of the US dollar as a perceived safe haven.
**Review of Recent GBP/USD Performance**
To anticipate likely moves in the week ahead, it is essential to consider how the currency pair has fared in recent sessions. The past week exemplified holiday trading, with the pair moving in a relatively tight range. Bids were supported around the 1.2650 region while rallies towards 1.2780 met with selling pressure.
**Technical Analysis: Chart Patterns and Levels to Watch**
As highlighted by Christopher Lewis in the original analysis, the GBP/USD’s technical outlook is nuanced. The pair hovers near significant technical thresholds that will likely determine the trend for early January. Below, we break down the essential components of the technical landscape.
*Support and Resistance Levels*
– **Major Support Zones**
– 1.2650: A level that has repeatedly attracted dip buyers; a pivotal threshold for renewed bullish conviction.
– 1.2500: A critical psychological and technical level; a break below could amplify selling pressure.
– **Major Resistance Zones**
– 1.2780-1.2800: Repeatedly capped upside momentum in recent weeks.
– 1.2850+: An area that, if breached, could encourage further bullish extension towards the year’s highs.
*Moving Averages and Momentum Indicators*
– The 50-day and 200-day moving averages have narrowed, suggesting an impending inflection.
– Daily Relative Strength Index (RSI) readings are neutral, neither in overbought nor oversold territory.
– Price action remains cable-bound, indicating that a clear directional move could materialize early in the year as trading activity normalizes.
*Chart Pattern Observations*
– The pair is consolidating within a broad horizontal channel
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