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21.01.2026 03:49 AM
The GBP/USD currency pair is also showing gains for the second day in a row. There is probably no need to explain the reasons for the US currency's decline. As we have already noted, we are still surprised that the dollar sell-off in 2026 only began now and that it has been so weak. However, the flat on the daily TF for the euro pair still explains a lot. The euro cannot get out of the 1.1400–1.1830 channel, and the British pound cannot move in any direction without the euro's approval. As a result, both pairs remain, to one degree or another, essentially stuck in the medium term.
Most traders probably already know that Donald Trump introduced new tariffs against a number of European Union countries. But some ask: what does this have to do with the United Kingdom? Britain is not an EU member and has no direct relation to Greenland. Last year, London was the first to sign a trade agreement with Donald Trump, demonstrating friendliness toward the US and the new-old president. As it turned out in 2026, Britain trod on the same rake as the European Union.
The UK received the tariff increase because it supports the territorial integrity of Denmark and the entire European Union. After Trump's aggressive statements regarding Greenland, EU countries decided to send a few dozen troops to defend the island. This is not a joke. The alliance countries allocated about 30–40 soldiers to defend the world's largest island. Britain was not left out and sent one military officer. It was precisely this officer who led Trump to raise tariffs by 10% in contravention of last year's agreements.
Donald Trump also criticized London's sale of Diego Garcia in the Indian Ocean to Mauritius. The deal was completed last year. Trump said the sale of Diego Garcia was an act of weakness. In his view, Russia and China only understand strength, and the sale of strategically important territories perfectly illustrates the shortsightedness of the British government.
Therefore, now Trump demands that the European Union "do the right thing" before it is too late. The White House leader believes that Russia or China will eventually seize Greenland. Frankly, we have never heard of Moscow or Beijing wanting to seize Diego Garcia in the Indian Ocean, which also hosts US-UK military bases. Traders can decide for themselves how grounded Trump's fears are and whether they have any connection to reality. We believe Trump's sole motive is to grab a virtually nobody's island that nevertheless contains natural resources and oil. The story is practically the same as with Venezuela. Rhetorically, "we want to free the country from cartels and stop the flow of drugs to America," but in fact, "Venezuelan oil is now ours."
The average volatility of the GBP/USD pair over the last 5 trading days is 70 pips. For the pound/dollar, this value is "medium." On Wednesday, January 21, we therefore expect movement inside the range bounded by 1.3399 and 1.3539. The higher linear regression channel has turned upward, indicating trend recovery. The CCI indicator entered the oversold area 6 times over recent months and formed multiple bullish divergences, repeatedly signaling the continuation of the uptrend.
S1 – 1.3428
S2 – 1.3306
S3 – 1.3184
R1 – 1.3550
R2 – 1.3672
R3 – 1.3794
The GBP/USD pair is attempting to resume the 2025 uptrend, and its long-term outlook has not changed. Donald Trump's policy will continue to pressure the US economy, so we do not expect the US currency to strengthen. Thus, long positions with targets at 1.3550 and 1.3672 remain relevant in the near term as long as the price stays above the moving average. A price below the moving average suggests considering small shorts targeting 1.3306 on purely technical grounds. From time to time, the US currency shows corrections (in the global picture), but for a trend to strengthen, it needs broad positive catalysts.
