Created on January 02, 2026

• The British Pound had a tough session on Wednesday again as the 1.35 level continues to be a barrier.
• With that being the case, I think it’s worth watching very closely the 1.35 level as it is a large round psychologically significant figure and a level that a lot of people will be watching very closely.
• If we can break above the 1.3550 level, it opens up the possibility of a move to the 1.37 level.

Federal Reserve and Bank of England

If we break down below the lows of the Wednesday session, we probably go looking to the 50-day EMA, perhaps the 200-day EMA after that, and then eventually the 1.32 level. In general, this is a market that I think continues to be very noisy and, of course, will be driven by the US Dollar more than anything else.

While the Federal Reserve is expected to cut rates next year, the reality is that a lot of the economic numbers coming out of the United States are stronger than people are comfortable with, as far as cutting twice. We’ll see whether or not that ends up being the case, and of course, we’ll have to watch the Bank of England because they just cut. Now the question is, will they have to cut more?

I do think there is potential for either direction at this point, and we’ll just have to watch how things play out over the next couple of trading sessions. The early part of next week will be a bit thin, but as we get later in the week, I think you start to see a little bit more liquidity, a little bit more reality when it comes to this market. Keeping in mind that on Friday there will be trading, but it will be in very thin conditions, so I wouldn’t read too much into this market until at least Monday of next week.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.