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The GBP/USD pair continued to correct on Monday after last week's sharp surge, which effectively marked the end of the month-long downtrend. As we have repeatedly noted, technicals are the primary driver for sterling at the moment. Price bounced off the lower edges of three overlapping sideways channels on the hourly, daily and weekly timeframes. From a purely technical standpoint, it is therefore reasonable to expect moves toward the upper boundaries of those channels. We continue to believe the dollar's one-to-one and a half-month advance was largely unjustified, so sterling can now show a similar technical rally. Local fundamental support is not required. Previously the market ignored pound-positive data; now it may ignore positive dollar news. Movements inside a flat are often random. On Monday and Tuesday, the price bounced three times off the 1.3301–1.3309 area, as seen on the hourly chart. That pattern suggests the pound is primed for further growth. No major US or UK events occurred on Monday, so volatility remained low.
Technically, the pound has not only made a corrective move but has also set up for a stronger, more sustained uptrend. Because the sideways channels on the daily and weekly charts remain valid, it is logical to expect the pair to push toward their upper edges.
On the 5-minute chart, price bounced twice from 1.3301–1.3309 on Monday and once more overnight, producing three buy signals. The move up is not yet large enough to declare profitable long positions across the board, but sterling could strengthen further through Tuesday and Wednesday.
COT reports for the pound show non-commercial traders have been net sellers for several months. The net position is negative despite the persistent long-term uptrend. Given events in the Middle East, it is unsurprising that dollar demand has remained relatively strong in 2026. The US–Iran conflict is formally paused but not resolved. The Federal Reserve's shifting policy stance also supports the dollar, and the ascending trend line has been breached — but that breach occurred within a flat, so we do not view the long-term uptrend as finished.
Over the long run, the dollar continues to weaken under Donald Trump-associated policies, as shown on the weekly chart. The trade war will continue in one form or another, and Trump's policies weaken the US currency both directly and indirectly. The long-term uptrend remains intact. According to the latest COT report (October 13), the "Non-commercial" group closed 1,100 contracts and opened 8,300 SELL contracts — a net reduction of 9,400 contracts in the group's net position over the week.
On the hourly timeframe, GBP/USD may be completing the downtrend that lasted a full month and lacked strong justification. On the daily and weekly timeframes, price cleared liquidity at previous lows and remains inside sideways channels. Therefore, the pound can be expected to rise at least to 1.3650, the upper boundary of the daily-chart sideways channel. The reasons for the pound's rise are no more compelling than those for the dollar's rise over the past month.
For October 20 we highlight the following important trading levels: 1.3042–1.3050, 1.3096–1.3115, 1.3179–1.3187, 1.3248, 1.3301–1.3309, 1.3369–1.3377, 1.3465–1.3480, 1.3588, 1.3671–1.3681. Senkou Span B (1.3231) and Kijun-sen (1.3252) may also provide signals. It is recommended to move Stop Loss to breakeven after price has moved 20 pips in the intended direction. Ichimoku lines may shift during the day and should be considered when defining trading signals.
Today the UK will publish relatively important unemployment and wages data, which do not directly determine Bank of England policy but may interest traders. UK inflation — a more important release — is due tomorrow. The US will release housing starts and building permits today. We expect the pair's main moves to occur in the first half of the day.
Traders may consider 1.3248–1.3252 a target for short positions if price closes below 1.3301–1.3309. A bounce from 1.3301–1.3309 would make 1.3369–1.3377 a target for long positions.
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