GBP/USD: Sterling Rises in Second Day to Challenge 3-Year Peak as Dollar Loses Grip

UK currency wasn’t asking for permission when it decided to plow through the dollar’s defenses. Now it may want to break out to a three-year high above $1.3630.

🔥 Sterling Goes for It

• The GBPUSD pair climbed to $1.3626 in early trading Tuesday, putting the pound within striking distance of its three-year peak near $1.3630. A clean break above that level could open the door for a bigger upside push if momentum holds.
• Two days of strong gains have reversed just about everything from last week’s slide, as traders pivoted out of the greenback after the war between Israel and Iran showed signs of de-escalation. Donald Trump this morning said the two sides have reached a ceasefire and warned against violating it.
• But that’s what both parties accused each other of doing — Israel launched a barrage of missiles on Iran after it said Tehran violated the truce. And vice versa. The situation prompted Trump to call out both sides. “Israel, as soon as we made the deal they came out and they dropped a load of bombs,” he said.

🚨 Dollar Falters Out There

• The fragile ceasefire appears to be holding up across markets with traders continuing to price in peace above war jitters. The US dollar index continued to drift lower, hovering near a three-year low around 98.00 as traders dialed back expectations of another escalation.
• The greenback was acting as a safe haven for FX bros who were looking to park their cash during the peak of uncertainty amid geopolitical chaos. But right now, the sentiment appears to be shifting. And that’s seen across the board.
• The EURUSD moved higher to regain the $1.16 level after dipping as low as $1.1450 just yesterday. The USDJPY also staged a U-turn with the dollar washing out more than 2% from its valuation against the yen since yesterday, crashing from ¥148.00 to ¥144.84. But let’s go back to the Cable.

👀 Eyeing the Breakout

• From a technical perspective, the pound-dollar is flirting with a breakout zone that’s been a cap since early 2022. A confirmed move above $1.3630 could bring in fresh buying interest, with some technicians eyeing the $1.38 to $1.40 zone as potential medium-term targets.
• Momentum indicators are turning bullish, and sterling’s relative strength index (RSI) is starting to tick higher — suggesting that the rally still has room to run if buyers stay aggressive.
• The wildcard remains broader market sentiment. If global risk appetite holds up — especially if war tensions stabilize (is anyone even talking about tariffs anymore?) — the pound may enjoy some wind at its back.