GBP/USD rose about 0.78% on Thursday, even though the Bank of England kept interest rates unchanged. The pair was trading at 1.3581, with a bullish engulfing pattern close to forming.
The technical view is neutral but leans upwards after GBP/USD moved above a resistance trendline near 1.3560/65. The RSI jumped above 60, which points to stronger upward momentum.
Bullish Engulfing Breakout Scenario
A break above 1.3600 would confirm the bullish engulfing pattern and could lead to a test of the 11 February high at 1.3711. If 1.3711 is broken, the next target is 1.3800.
If price reverses near the 29 April high at 1.3528, GBP/USD could fall towards 1.3500. A firm break lower would bring 1.3468/67 into view, where the 100-day and 20-day SMAs meet, followed by the 23 April low at 1.3448.
We are seeing the GBP/USD pair show considerable strength, pushing toward the 1.2900 handle as markets anticipate more aggressive action from the Bank of England. This comes even after the BoE held rates steady last week, as recent data shows UK core inflation remains sticky at 3.1%, well above the bank’s target. The market is increasingly pricing in at least one more rate hike by autumn, creating a bullish environment for the pound.
Given the strong upward momentum and a bullish-engulfing pattern forming on the charts, traders should consider buying call options. A move through the 1.2900 level could open the door for a challenge of 1.3000 in the coming weeks. Purchasing call options with a strike price around 1.2950 offers a way to capitalize on this potential move with a defined and limited risk.
For a more measured approach, we could implement a bull call spread to reduce the initial cost of the trade. This would involve buying a call option at a lower strike, like 1.2900, and simultaneously selling a call option at a higher strike, such as 1.3000. This strategy profits if the pair moves toward the higher strike price by the options’ expiration date, aligning with the current technical outlook.
Downside Risk And Hedging Plan
We must also prepare for a potential reversal, especially if the pair fails to decisively break key resistance. If GBP/USD falls back below the 1.2820 mark, it would signal that the bullish momentum is fading. In this scenario, purchasing put options could serve as a hedge against existing long positions or as a direct bet on a downward move toward support around 1.2750.
This situation feels familiar, reminding us of a similar setup we saw in the third quarter of 2025 when expectations of policy divergence between the Fed and the BoE drove a multi-week rally in the pound. The current divergence is even more pronounced, with futures markets now pricing in a 70% chance of a US rate cut by September while BoE hike odds remain firm. This historical precedent strengthens the case for a sustained move higher in the pair.
